According to the report from the two organizations, private brand performance within the grocery channel dramatically increased in the past year, posting annual sales of $138 billion across multi-outlet plus convenience store retail channels in the U.S. in 2017. That said, supermarkets face major competitive challenges and are experiencing steady own brand share leakage to other retail channels, the report emphasized.
The report comprises the first half of a four-part series in FMI’s and IRI’s annual exploration of the “Power of Private Brands.” A consumer study focuses on insights into how to build engagement, while the register report reveals how the grocery industry can improve its private brand business.
According to the report, 69 percent of consumers said it’s very or somewhat important to have a good assortment of private brands in food and beverage.
“Private brands have become full-fledged brands in their own right, and the research emphasizes the importance of not making assumptions when appealing to demographics and audiences, including how store brands are marketed and positioned,” FMI Vice President of Industry Relations Doug Baker said in a press release detailing the report. “In fact, Generation X is responsible for 31 percent of all dollars spent on private brands across all outlets, compared to 19 percent each for older millennials and younger [baby] boomers.”
The research outlines consumer demand trends as well as a range of next steps for retailers, including how to further leverage the consumer’s desire for variety, and how to increase trial to battle any lingering negative perceptions. Retailers made considerable progress not only in reversing sales declines, but in closing the gap with national brands, supported by a reduced sting from deflation. The report says that retailers outside of the grocery channel, including mass and club operators, have been performing much better in private brands than other retail segments.
“While the news for private brands overall is good, there is a special hurdle for food retailers,” said Mark McKeown, principal of client insights for IRI. “We needed to uncover why the biggest growth is taking place outside the grocery channel. Our first step was examining the evolution of private brands into tiers and which of these were driving growth. We then took a closer look at how private brands are performing in specific categories and departments to address competitive challenges. And this year, we examined the different groups of private brands, including lifestyle (products that cross over categories and departments and deliver a common promise, such as clean label or organic) compared to regular (retailer banner brands that do not deliver a common promise) and how consumers perceived and purchased either.”