Big picture: Private brands positioned to grow share

Looking at the big picture, private label slightly underperformed expectations, according to Krishnakumar “KK” Davey, president of strategic analytics at IRI.

Davey looked back at a study put out in May 2020 from the Chicago-based analysts that predicted private brands would grow by $20 billion in 2020, but his numbers show it grew about $16 billion, an increase of 0.6 share points versus 0.2 a year ago. Nevertheless, it is growth, and Davey said it was driven from a very robust first half of the pandemic, when out of stocks were high. Those early months generated a 0.5 gain and then things stabilized.

“I mean, people just came to stores and grabbed whatever they could, particularly in those critical months of March and April,” he said. “Many categories went out of stock — given that just-in-time inventory that we had all honed over decades.”

Pam Ofri, director of product development and operations for own brands at Wakefern Food, agrees that the supply chain broke down. “As a result, consumers changed their buying patterns to purchase what was on-shelf vs. what brands they were previously loyal to,” she said. “This supported own brand sales as new consumers were incentivized to buy what was in-stock, and it also introduced and converted consumers to our new brands.”

Bill Smith, director of Our Brands, Tops Friendly Markets, saw the same results. “During the beginning of the pandemic, national brands had many supply issues. During that same time, Our Brands had strong in-stock position, increased presence in our weekly ad, and strong in-store merchandising,” he said. “The combination of these three gave us the opportunity to showcase Our Brand’s quality and value that drove trial, repeat purchase and loyalty.”

While IRI saw less growth than anticipated for store brands, Davey believes store brands are going to grow — and faster — driven mostly by the leading mass and grocery retailers. He noted that Target, Kroger, Albertsons, Costco, Walmart, Sam’s Club, all were dominant and have changed the culture and appearance of what it means to be a private brand.

Wakefern, H-E-B, Trader Joe’s, and others are among the smaller-footprint retailers changing the culture of private label, but Davey said most of the growth in the industry is coming from those major players, according to their panel data.

“As we stabilize, I think private label will just continue where it left off,” he said. “Large manufacturers are still losing a little bit of share to private label, losing share in the last quarter and quarter or two. And the reason is simple, right? I think private label is becoming smarter. It’s positioning on the premium end of the spectrum, the value end of the spectrum, sustainability, self-care, society care, all of those dimensions.”

IRI also had a recent study show that private label, combined with smaller challenger brands, are moving in on large nationals. In 2020, the consumer goods industry as a whole grew 10.3%, with smaller manufacturers (including companies with annual measured channel sales of less than $1 billion) collectively capturing a third of that growth and private brand products accounted for 18% of that growth. Combined, challenger brands and private brands captured 34.1% of total CPG growth last year. Though large national brands lost market share in each of the last five years, they still account for 46.7% of total U.S. sales in measured channels, per IRI.

Davey believes part of this inching into national brands is that private label has captured premiumization. A November IRI study found that consumers were looking to find joy from premium products while at home during the pandemic, and it opened a door for private brands to offer premium items at a lower price. He cited Kroger’s CEO Rodney McMullen:

“In many categories like cheese, beer, and wine and alcohol, shoppers have upgraded in terms of the quality of what they’re buying,” he said. “Customers are splurging because they’re starting to understand the difference in the quality of things. We believe that’s something that will stay forever. Once you have an incredible cheese, you kind of get spoiled and it’s hard to go back to what you had before.”