Can retailers get store brand growth back on track during the pandemic?

Photo: Getty Images/VLG
Nov 19, 2020

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.

National brands in recent months have been outperforming private label brands for the first time in years, but new trial and online expansion are expected to be among the factors helping store brands regain momentum.

Simple availability or lack of store brands is believed to have played a big role in the seemingly temporary shift, says Spencer Baird, chief transformation officer for Inmar Intelligence. “Pre-COVID, overall days of supply or on-shelf quantities favored branded items. So I would assume that in many instances, the top store brand items ran into out-of-stock issues fairly quickly,” he said.

Store brand manufacturers, most of which supply different products for a range of retailers, couldn’t replenish as quickly as their national brand rivals.

Pre-COVID underlying-drivers of private label’s growth in recent years remain, including providing differentiation and better margins for grocers. Improved quality continues to attract more consumers and the premium tier remains a nascent opportunity for many grocers.

An unprecedented amount of private label trial is expected post COVID-19 based on consumers having become more agnostic about brands early in the pandemic. A slow economic recovery post-COVID could further encourage consumers to buy store brands.

One potential obstacle to continued growth is the rapid pandemic-driven shift to e-commerce as private brands have historically been underrepresented on digital platforms. Eighty-three percent of grocers surveyed by FMI expect to boost private label strategies for e-commerce in the coming year. For many, says Mark McKeown, client insights principal at IRI, that means developing their own platforms instead of using a third-party provider like Instacart.

“Retailers that build their own platforms definitely have a sustainable advantage,” he explains, citing the ability of chains like Kroger and Walmart to suggest private label products based on the customer’s shopping list and/or history.

Nicole Peranick, senior director of retail transformation at Daymon Worldwide, offers some additional suggestions for retailers looking to boost private label sales via e-commerce: creating dedicated areas on their websites, allowing private brands to top digital search, and driving engagement through integrated online content that showcases private brands as solutions.

DISCUSSION QUESTIONS: How will shopping behavior changes amid the pandemic affect the growth trajectory of store brands in the grocery space? In what ways does the online shift present a major opportunity for grocers to amplify their private brands?

Please practice The RetailWire Golden Rule when submitting your comments.
"Private brands benefit more when shoppers have more time to enjoy shopping and try different products."
"It really comes down to shelf availability and product quality. Consumers who already were buying store brands only switched to national brands when the shelves were empty."
"Lack of availability has been a temporary issue with private label, but that will be resolved once we get back to normal."

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19 Comments on "Can retailers get store brand growth back on track during the pandemic?"

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Richard Hernandez
Richard Hernandez
Director, Main Street Markets
6 months 30 days ago

Early on in the pandemic national brands were having trouble keeping up with demand, so a lot of what was on the shelf was house or private labels. People tried them, and more likely than not liked them and are now sticking with the private label option most prevalent in the stock-up items (bath tissue, paper towels, cleaners, laundry detergent, etc.) I believe this will help to solidify the house brands as viable options and continue to increase their market share within their organization.

Jeff Sward

Store brands represent an opportunity across all of retail, not just grocers. Sounds like Bed Bath & Beyond is betting big on store brands. Kirkland might be the biggest store brand anywhere, and it transcends product categories. After a while a good store brand becomes a solid brand unto itself. It has a solid brand promise and it consistently delivers on that promise. Genuine quality and authentic value will win every time.

Joel Rubinson

It’s really about availability. If store brands are there for essentials (toilet paper, disinfectants, etc.) they will sell if they are kept in stock. Retailers might also change or remove limits for private label. It appears that another wave of panic buying and out-of-stocks might be approaching, so retailers will get another opportunity to boost private label share.

Neil Saunders

The pandemic has been very helpful to national brands and has helped push up sales. This is particularly so in categories like household essentials, cleaning products, and some grocery categories like canned goods. There have been gains for private labels too, but these have been hampered by lack of availability and consumers migrating to some well-known brands. However, the picture is very mixed: Target’s Good & Gather own brand continues to grow at a rapid clip – because it is innovative and interesting to the consumer. I expect other retailers to ramp up their private label efforts once trading starts to normalize.

Dr. Stephen Needel

I think those who are going the private label route have tried it – don’t expect to see new households coming into the PL franchise post COVID-19. Those who have found some of the really good private labels (like Kirkland, Publix, etc.) might expand their horizon. But Joel is right – now much of this is distribution-based (it’s all that’s on the shelf) and some of it is economic (it’s the best I can afford).

Ron Margulis

Not to cast doubt on the Inmar findings, but Trader Joe’s, Aldi and even Lidl have done very well with their brands throughout the pandemic. This is likely because they have more control over their supply chains than other retailers, but also because they only have a physical presence and haven’t had to deal with e-commerce.

David Weinand

It comes down to the quality of the private label brand. Per the write-up, many consumers were forced to choose private label options when national brands weren’t available. If the quality was good, consumers will stay with that brand. With the recent resurgence of cases, the opportunity still exists to push private label in the face of shortages – just be sure the quality is there.

Andrew Blatherwick
During the early part of the pandemic, focus was on getting stock and keeping shelves full. In many cases the national brands were better geared up to managing availability because that’s their sole focus and store brands lost out. However as retailers get back in control and are better able to plan and work with suppliers store brands will not suffer in the same way, they will get trial and if they are good quality at the right price will gain acceptance by the customers. Retailers do have the power to influence online sales on their own sites and it is in their interest to push store brands from a profitability perspective but more from a loyalty point of view. Retail buyers have to become more like brand managers and really work at the relationship, planning and supply chain management of their own brand items to compete with the national brands. Once they do that then the retailer has all the capability to build the strength of their own brands. Post pandemic this will continue… Read more »
Ralph Jacobson

What this trend reversal of national brands accelerating past private label shows me is that the economy is strong overall (with some exceptions, of course) and consumers are “trading up” with their spending.

Mark Price

Consumers have been purchasing more traditional packaged goods products during the pandemic, driven by more cooking at home and a desire for security and reassurance provided by the brands they used in their past. Given the economic insecurity present today, it is logical that store brands will also prosper.

The barriers, as this article has described, are logistical — both availability and presence on shopping applications. The key for retailers will be to promote their store brands on their apps. Otherwise consumers may not have the store brands at the top of their minds.

Overall, this winter should be a good season for grocery retailers and for their brands as well.

Di Di Chan
There’s a big difference between buying – purchasing what shoppers need as fast as possible; and shopping – a full experience that involves browsing, discovering, and having fun in stores. During the pandemic, most shoppers do not have a fun shopping experience. They are buying what they need in the most convenient way possible. That’s not a shift in shopper’s preference for shopping – it is a response to the pandemic. The desire for shopping, like the desire to eat out and socialize more, have not gone away. If anything, they have only increased. A good indication is to look at e-commerce growth; even during the pandemic, more than 85 percent of shoppers are still shopping in stores. Private brands benefit more when shoppers have more time to enjoy shopping and try different products. Some grocery stores are using technology to give shoppers a more efficient shopping time. For instance, Westside Market is the first to use location navigation technology (provided by SIRL). Inside Westside Market’s mobile checkout application, shoppers can search for a product… Read more »
Gary Sankary

One of the changes in consumer behaviors during the pandemic has been prioritizing availability of brand loyalty. I believe this will give a boost to store brands, especially if retailers can continue to ensure that they can stock the products their customers want. As Ms. Leathers points out, the benefits for a strong private label program at retail are compelling; brand loyalty, better margins and more control over production. Add price advantages for the consumer during tough economic times and I think this is a great time for retailers to promote their own brands and drive adoption.

Ryan Mathews

I’m just a tad skeptical. If I look at the local Trader Joe’s and Aldi I see lines wrapping around the block as I have throughout the pandemic. Costco’s Kirkland brands – across all categories – seemed to do well also. In other cases I think people wanted national brands, went to store brands as a forced alternative, went back to national brands when they were available, and will switch back to store brands if hoarding begins again in earnest. My Second Rule reads, “Don’t look for patterns in anomalies, look for patterns of anomalies.” So let’s see what post-pandemic shopping looks like. As for e-commerce opportunities, if the author is right and some of the decline in store brands is due to supply, how does increasing demand alleviate that problem?

Camille P. Schuster, PhD.

Whether consumers see the private label choices when looking for products is important so they at least know they exist. So online searches need to facilitate this step. Having private label products available consistently is the next step. Both of these steps are essential for trial. Repeat purchase depends upon the quality of the items when purchased.

Ricardo Belmar

It really comes down to shelf availability and product quality. Consumers who already were buying store brands only switched to national brands when the shelves were empty. They may need a nudge to switch back if they’re satisfied with the national brand. This means retailers need to emphasize the marketing for these brands to get those customers back. The same happened in the other direction, from national to store brand during the pandemic as well. Similarly, if the quality was good enough, or perceived as equal or better, then the consumer won’t be switching back. A good example of that might be Target’s Good & Gather brand.

The bottom line is that if retailers want to sell more private label brands they need to ensure shelf availability and product quality — same as before, but it may take more marketing muscle during the pandemic to cause a change in shopper buying patterns.

James Tenser

Let’s not mistake shopper preference for product availability. Certainly shortages in some pandemic-sensitive categories led shoppers to try alternate brands, including some own-label products. This “forced discovery” no doubt led some shoppers to broaden the set of items they deem acceptable. In other words, it may have softened some entrenched brand preferences.

Great opportunity for private label, right? Well yes, until those items too were delayed in replenishment.

It will remain difficult for retailers to pin down preference patterns for months to come, until the supply chain finds new equilibrium. Private label manufacturers face the challenge too — especially where upstream raw materials supplies are inconsistent.

In the present era, some purchase behaviors are simply more pragmatic than emotional. I call this “least-worst” decision making. Not the same as establishing new brand or store-brand loyalty.

Cynthia Holcomb

Kirkland and Trader Joe’s are masters of the private brand universe. It seems most in-house “branded” grocery products are nothing more than the act of private labeling the products of large national brands. There is a keen distinction between private label products and private brands. Private label products require little thought, simply relabel the product. Whereas a private brand is cohesive, time and energy are invested to develop and implement brand standards focused on the grocer’s end-user preferences.

Grocers should consider Trader Joe’s mission statement on the wall of every TJ’s. This mission statement is evidenced in every TJ’s product. Shoppers can shop with confidence, try a vast number of new products always evolving in TJ’s and Kirkland product selections. Shoppers trust both private brands for quality, price, and wholesomeness.

Craig Sundstrom

I think we all agree that none of us can agree on how trends will be affected by the Pandemic (other than the obvious one that online sales have been given a big boost): some will be re-enforced, while others will be reversed … but exactly how that will play out is a wildcard.

As for house brands, I seem to be thinking along contrarian lines here: my thought is that people who order online will order what’s familiar, and that’s more apt to be name brands; but of course that assumes substitutions aren’t allowed, and that someone doesn’t just click “can of peas.”

John Karolefski

Post-pandemic shopping will see consumers gradually revert back to their previous in-store behaviors, and that includes favoring superior store brands. Lack of availability has been a temporary issue with private label, but that will be resolved once we get back to normal.

"Private brands benefit more when shoppers have more time to enjoy shopping and try different products."
"It really comes down to shelf availability and product quality. Consumers who already were buying store brands only switched to national brands when the shelves were empty."
"Lack of availability has been a temporary issue with private label, but that will be resolved once we get back to normal."

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