Advance Look: FMI research identifies where private brands excel, fall short in online grocery

Ahead of its release next week, Store Brands shares insights from FMI’s latest Power of Private Brands report, measuring store brand success and outlining opportunities going forward.
Dan Ochwat
Executive Editor
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A recurring theme throughout the ongoing COVID-19 pandemic has been the acceleration of online grocery shopping, but just how well have private brands fared?

According to the retailers and manufacturers surveyed by FMI - The Food Industry Association, for its latest Power of Private Brands report released in advance to Store Brands, 67% of the private label assortment was made available online to shoppers during 2020; 14% of private brand sales were done online; and private brands grew 73% through e-commerce during the year.

It’s clear there’s a foundation of success already in place by retailers to promote private brands to the growing number of online shoppers. However, FMI’s report also noted a lack of private brand measurement online by retailers and some areas where branded CPGs remain out in front of owned brands.

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A major opportunity

Doug Baker, vice president, industry relations at FMI, told Store Brands that what surprised him most in the research — 61% of food retailers surveyed said e-commerce, including home delivery and click-and-collect Internet sales is considered “a major opportunity for private brands” and that percentage was even higher for companies already actively underway with private brand e-commerce programs.

The report also found that more than half of the respondents said “they are boosting private brand strategies for e-commerce,” including these main tactics that were put in place last year:

  • 39% said promoted private brands through email promotions and digital circulars;
  • 33% leveraged search engine optimization;
  • 33% put a priority on promoting store brands via online brand pages and storefronts..”

An effort to focus on those areas could be in response to where national brands seem to be out in front of private brands in grocery e-commerce.

Tactical approach to e-commerce

“The study found that national brands continue to engage consumers in ways private brands have yet to fully utilize,” Baker told Store Brands. He highlighted 10 areas where private brands “fall short of manufacturer brands in digital real estate,” he said, such as on the homepage, where only 20% of food retailers that were analyzed promoted private brands. Additionally, just over 4 in 10 food retailers included multiple product images on private brand product detail pages, and about half of food retailers included banner ads on product listing pages and search pages — but only 20% of the banner ads promoted private brands.

Those findings in the report specifically came from consultancy FitForCommerce, which mystery shopped 25 food retailers’ e-commerce sites and identified 10 opportunities for food retailers to effectively target consumers with private brand offerings. The FMI report also includes data from a consumer survey from FMI and The Hartman Group, a survey of food retailers and manufacturers, interviews with senior private brand leaders, and e-commerce data from IRI.

Other key findings from the robust report include ways to leverage search optimization for store brands, IRI’s e-commerce sales numbers for the food industry as a whole (up 25% for 52 weeks ended Aug. 8) and in-depth demographic details. For instance, when shopping online, more than three-fourths of shoppers use digital coupons, and further broken down, 80% of Gen Z/Millennial shoppers leverage coupons compared with Gen X shoppers (78%) and Boomers/Mature shoppers (63%).

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Doug Baker

The report also noted how shoppers tend to seek private brands online vs. national brands online, with 37% of shoppers seeking a private brand by name in a search, compared with 43% for a national brand. However, private brands beat national brands in the The Hartman Group research in the study with 34% of shoppers finding a private brand in their order history vs. 31% for a national brand; 36% have a private brand saved in as a favorite vs. 29% for a national brand; and 28% find a private brand via a referral section in a search such as a “you may also like” recommendation compared with only 18% for a national brand.

Lastly, the report noted that three-fourths of those surveyed found private brands met expectations or exceeded them over the past year when looking at online grocery but noted that private brands face a challenge in e-commerce in that most of the industry hasn’t reached a point of differentiating private brand KPIs between online and in-store to truly gauge how well private brands are performing online. The report found 81% of those surveyed said they do not measure private brand KPIs differently for online vs. in-store.

FMI’s e-commerce study can be found here when it's released Oct. 5. This is the second report from FMI this year under its Power of Private Brands series. Earlier it released one that highlighted the importance of suppliers and retailers working together. That full report is available here.