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Why do Millennials love private label groceries so much?
Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.
According to Cadent Consulting Group’s 2018 report, “The Branding of Private Label,” store brand dollar share in grocery is expected to hit a record high of 18.4 percent in 2018 and reach 25 percent over the next decade. One big reason: Millennials.
While the typical shopping cart is 25 percent private label, Millennials’ baskets are 32 percent — and almost half of these consumers plan to purchase somewhat or much more private label in the coming year. With no memory of white-label generics and little loyalty to national brands, “Millennials are driving private label growth,” says Cadent principal Karen Strauss. “They think of it as just another brand,” not a cheap substitute for the real thing. In addition, Millennials are much more likely than, say, Baby Boomers to shop in non-traditional outlets such as natural grocers, deep discounters, club stores and online where store brand sales are expanding.
The top non-traditional private label driver is Aldi, already a year into an ambitious plan to become the nation’s third-largest retailer (based on store count) by 2022. Aldi recently began upgrading its focus on better-for-you, fresh, organic, gourmet and prepared foods.
Several retailers are following Aldi’s lead and refocusing efforts on the perimeter where fresh-obsessed consumers are doing the majority of their shopping nowadays. They’re also raising the private label bar with ethnic, specialty, natural and organic offerings.
Indeed, private labels are increasingly about creating differentiation. In Cadent’s survey, 46 percent of shoppers (and 54 percent of Millennials) said their choice of retailer is influenced by the store brand. Forty-eight percent of shoppers (60 percent of Millennials) said they believe their retailer’s store brand is better than others.
“Private label is also the clearest expression of a retailer’s ‘brand’ and value proposition. If a retailer can’t come up with a compelling private label product, it’s the clearest sign that it doesn’t have a clear, convincing and differentiated strategy and that it doesn’t really know who its super-consumer is,” said growth strategist Eddie Yoon.
Discussion Questions
DISCUSSION QUESTIONS: Why do you think Millennials are attracted to private label grocery products as much as they are? Will grocers need to promote private labels more like traditional brands to achieve the market share gains forecast in the Cadent research?
Poll
BrainTrust
Steve Montgomery
President, b2b Solutions, LLC
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
I don’t think it’s that Millennials actively love private label products as much as it’s that branded manufacturers have failed to adapt their products and their marketing to appeal to Millennials. As long as private label products simply offer an alternative to branded CPG that is high on perceived quality and value, these private labels can ride a trend.
A lot of this comes down to the failure of big CPG to adapt to younger shoppers. Just look at the brand ethos and packaging design of some of the products from giants like Kraft-Heinz: they are old-fashioned and dull. So, younger shoppers (and increasing numbers of older shoppers) shun them.
Retailers, like Target, have seen an opportunity to fill this gap by beefing up their own brands. Market Pantry was revamped a few years ago to make it more aspirational and fun, which appeals to younger consumers. The new Smartly label goes even further. Things like pack sizes on items like trash bags are specifically designed for the smaller-space apartments of many Millennials.
On top of all of this is the value for money which most private labels offer. That’s appealing to many more consumers nowadays — young and old.
It’s not just limited to grocery retailers, and it’s not just limited to Millennials. Target, for example, has always been driven by private brands and has spent a lot of time and effort in the past few years reinventing those brands especially in the apparel and home areas. (Likewise the Kirkland brand at Costco.)
As far as grocery brands are concerned, give credit to Whole Foods and Trader Joe’s in particular for raising the bar on quality and value in their private brands — and giving their store “brand” added credibility as a result. At the same time, the fragmented nature of the media landscape makes it much harder for legacy national brands to reach mass audiences with a consistent message.
Two drivers of private label products’ appeal to Millennials are price and brand perception. As noted in the article they are to young to remember the quality perception of the white-label generic items. They are also too young to remember the power branded items held on the grocery marketplace.
I started in the supermarket industry as a part time clerk in 1962. There was no question in the shoppers in our store’s mind that private label was of a lesser quality. How else could they cost less? I remember my surprise as a food distribution student when we visited several plants and I saw the in many cases the only difference in the products was the can or jar they were to be packed in. Today retailers know that if they want their private label items to resonate with customers they have to put the same type of effort into their brands as do the CPG companies. Many have.
Millennials really aren’t loving it — per Cadent’s survey, 76 percent of a typical basket is not private label products, and I suspect with further in-depth review you’ll find that frequency of purchase is even less. Millennials’ income levels are still far below that of the average Boomer — as a matter of fact almost 25 percent behind them on median income. Frankly, they can’t afford the premium pricing for most private label products. What they do find however is status and brand value for select products. Connecting with friends and engaging on specific branding might be why the ratios of private label products in typical baskets for Millennials and others differ by ~7 percent. Part of this can also be attributed to stores like Aldi expanding — who sell only private label and are also seeking to corner lower pricing on select products. The store selection probably matters more than the private label nature of the buy.
Ananda, I think you hit on something more important that just focusing on the private label brands in a silo won’t reflect — and that’s the selection of the store brand, to begin with, by Millennials and any other demographic group. You can’t evaluate one without the other.
The “Millennials are so disruptive and driving this and that” narrative is simply not the case. It has become a broad generalization. As consumers of all generations seek value and organic offerings, if a private label offers what they are looking for outside the larger CPG brands then you have a winner. If traditional CPG brands are not offering the quality, organic offerings at a competitive price, the days of being loyal to a brand are coming to an end, and consumers will naturally gravitate towards private label offerings.
This particularly is the case with organic foods and packaged goods. Whole Foods has become increasingly competitive with their 365 private label brand and is now competing head to head with Trader Joe’s in terms of pricing and value.
To quote one of my favorite movies, Field of Dreams, “build it and they will come.”
Millennials realize that in terms of quality, there usually isn’t much difference between brand-name and store brand. In many cases, private label is a better value. And some grocery retailers, like Aldi and Trader Joe’s, do a great job of offering unique private label products instead of just providing a knockoff of a brand name. As long as private labels continue to step up their game more consumers, not just Millennials, will view them as a valuable alternative.
I really am not sure about this. I’d love to see a few more details such as how many people were interviewed, how private label was defined — did it, for example, include perishables, etc., and was a distinction drawn between, “private label,” and retailer-controlled brands in the bakery, deli and foodservice departments? Barring those details, and little things like demographic profiling, it’s hard to say what we can — or should — make of this study. If, for example, there were customer intercepts in Aldi or Costco, versus say Kroger or Stop N Shop, that might have something to do with how the results came out. So I really don’t know what to say other than to offer the caveat that generational cohorts don’t always behave the way marketers say they do, or in the same way over time. Most Baby Boomers didn’t go into their 40s gobbling acid, wearing love beads or skinny dipping in local ponds and I suspect that Millennials in their 40s may have a different relationship to lots of things — including brands — than they do now.
I don’t accept that this is purely a Millennial-driven outcome. The fact is, more and more consumers are being value-driven in the grocery store and that value equation is truly a multivariable one not just based on price. The quality is there in private label goods to draw the attention of most shoppers. You also have to consider where each demographic group is shopping as Ananda pointed out in his comments. If we accept that more Millennials shop at stores like Aldi which are fundamentally private label driven, then data such as this will skew in the favor of private label. A more broad analysis is needed. The bottom line I’d say is that private label will continue to expand — and this is a wake-up call for CPG brands that need to realize they are not connecting with the modern consumer in the same way they once did. That brand loyalty is fading and CPGs need to act if they want to turn this around.
To the extent Millennials are embracing organics and more expensive healthy choices while also trying to limit expenses, higher-end private label allows them to eat better while limiting their costs.
The days of CPGs relying on their unique/traditional flavor profile to maintain share are over.
As noted in the article, the legacy national brands embraced by their parents and grandparents have little inter-generational impact. However, I believe their are two reasons for the growth of private label within this generation: 1. National brands have neglected their value pricing and distinctive product positioning; 2. Private label enables the Millennial to purchase a product with unique attributes not found in branded products.
Think about it — every food retailer carries the leading national brands, Coke, Kellogg’s, Hershey, Colgate, etc. The question is what will make a shopper, particularly a Millennial, drive past one retailer to shop at another. We know there are many variables contributing to this decision: store assortment, customer service, exciting perimeters, etc. However, with this generation, research indicates that unique private label offerings may be a significant tie breaker. Going forward, retailers need to recognize the many potential tie breakers, with private label representing a bonafide game changer.
Millennials are attracted to value and experience. Good brands with good business practices and good prices are a natural. Private labels are no longer just knockoffs of national brands.
Many retailers have done a phenomenal job of curating private label brands that include quality products and brands that have great reputations. It transcends well beyond Millennials. However, Millennials appear to be less set in their ways than Baby Boomers. Some Baby Boomers still believe that traditional manufacturer brands are better in quality and are worth a price premium and continue to buy the same products their parents purchased. But this is changing, as private label brands are becoming more prevalent.
Millennials are open to trying new brands and, once they have good luck with a private label brand, they become brand loyal, such as with Aldi, Trader Joe’s and Costco’s Kirkland brands.
The article answers its own question when it says Millennials think of private label as just another brand, not a cheap substitute for the real thing.
When I was growing up you had to have the name brand – it didn’t matter what it was, it had to be the authentic item. Commercials on TV and ads in newspapers preached“accept no substitutes”. At the grocery store, the packaging for generics and private label items were never as appealing as the big brands. I can specifically remember my mother shying away from private label items.
It’s different today; private label goods have the same appeal as name brands. Some have even better packaging. I’m not sure that this is limited to just Millennial shoppers. If you like a particular store there’s a good chance you will like the stores’ private label items, too. I think these days we all care more about what’s in the package – fresh, organic, vegan, pure, natural – than we do about it coming from a big name manufacturer.
One component of private label advances has to do with the ability to achieve brand equity across categories. It seems to me that once shoppers, albeit Millenials in particular, note that a private label brand offers great value and quality for salad dressings, peanut butter, cookies as well as household cleaners, etc. they’re likely to accept other products and categories from that private label.
It wasn’t always like this with private label. Consumers would be inclined to exclude certain private label branded categories as not acceptable, e.g., snacks and especially cranberry sauce at Thanksgiving.
That can explain why there’s a larger proportion of private label in Millennials’ shopping cart. Some retailers have been able to develop a private label that has become for their shoppers the go to brand for quality and value across many categories.
Part of it is that Millennials value high priced tech stuff more than they do a premium can of corn, and there are 30% of college graduates who have moved back into their parents home, because they can not afford the rent in the big cities. Many adults shop at Aldi and Costco to save money, and sales of private label food will keep rising, as household budgets are tightening.
Millennials like to explore and find hidden gems all the time, including shopping. The private label category lends itself to exploration and moreover to a social media post.
There’s no need to promote private label outside of the grocery store or online. That would eliminate the attraction to Millennials.