The Power Of Private Brands: An Inside Look

STORE BRANDS: In this year’s report, shopper awareness of store brands was at 90%. Is there anything in the research that shows consumers are viewing store brands as simply brands?

DOUG BAKER: In a lot of ways, private brands have really arrived. We’ve talked for a long time about how private brands are more than just a label — they are an extension of a store’s brand and value proposition. Our research finds that shoppers offer increasingly positive perspectives about private brands versus prior years, using words such as “good,” “great,” “quality,” “better,” “brand” and “value.” They also relay considerable openness to trying more private brand items. This indicates that private brands are becoming much more mainstream in shoppers’ minds. 

ANGIE BALIAN: Virtually all shoppers are now buying private brands with 94% of shoppers purchasing private brands at least occasionally, which is on par with the buying patterns for manufacturer brands.  Higher awareness, availability, and good, consistent quality and taste are key drivers of increased private brand purchases.  

EMILY DETWILER: The data shows us that consumers see store brands as brands that they trust and are turning to for quality, overall value, and better options for a shopper's overall budget. The word "brand" even resonates with shoppers in the data, proving that they truly perceive store brands as brands. The fact that they associate store brands with choosing where to shop also shows they are considered brands.  

PAMELA OFRI: Within the customer survey, the word “brand” was top of mind for the consumer. While customers do not seem to be mixing own brand with name brand, it does seem that private label has established its space in each store as its own brand. 

STORE BRANDS: In the FMI survey, 55% of shoppers said they have been purchasing more private brands over the past year. Are pocketbook issues still the key driver, or are the motivating factors changing?

BAKER: We hear from shoppers that the number one reason for purchasing private brands is price and value (both at 71%). Consumers have growing expectations for private brands beyond good value. Though cost is a factor, 51% are likely to continue purchasing private brands, even if overall grocery prices decrease.

We’ve also found that grocery shoppers today have an expanded definition of value. Once, value was defined as just price and quality, but today, shoppers weigh more factors, including convenience, experience, and relevance, when deciding where to shop and what product to purchase. Private brands fit within this expanded definition of value and often allow shoppers to meet multiple aspects of how they define value. 

BALIAN: Historically, private brands were established as an affordable, less expensive, and potentially lower-quality alternative to national brands. Today, private brands are not what they used to be, providing more than just a less expensive alternative to national brands. As a result, perceptions of Private Brands have increased vs. 2023 – with meaningful increases in perceptions of quality (+12) and taste (+7).

While value remains important in this economic environment, significant improvements in quality, packaging, innovation, and health and wellness alternatives have resulted in increased trial, repeat, and adoption by more consumers. Relative to markets around the world, the U.S. remains under-developed in private brand share and we anticipate accelerated growth and increased share of basket in the years ahead through overall stronger private brand programs across the retail landscape. 

DETWILER: Economic factors are certainly on shoppers' minds, but the fact that shoppers have tried store brands, trust the quality and value and also perceive them as true brands are key factors for keeping shoppers coming back to store brands. Shoppers also appreciate the multiple items they can trust from a store brand across many or all categories across the store. This is truly a differentiating factor from most manufacturer brands, which are only in a few categories. The trust factor is a huge element that helps drive cross-category purchases. 

OFRI: Inflation is absolutely a factor in the increasing shift to private brands as a means to combat higher prices. However, another driving factor is the sheer growth in familiarity around private label, consumer education around own brand quality and value, the growth of Own Brand portfolios with hero items (items you cannot get anywhere else), and premiumization of unique products. 

STORE BRANDS: Fresh bakery, milk/non-dairy substitutes, and paper products were the top three categories shoppers said they only buy store brands. Why? 

BAKER: I think that an expanded definition of value comes into play here. Shoppers are weighing price, quality, convenience, relevance, and experience when they compare products these days, and those concepts all factor into their decision-making. 

BALIAN: Consumers' decisions in these top 3 private brand purchased categories are being driven by a combination of many needs including good value, quality, and taste.  By delivering consistent quality and good taste, consumers are not necessarily seeing the need to trade up and pay more for national brands. This is a great example of how consumers are not just looking for value in price, but are willing to switch to private brands through quality and taste meeting their needs.  

DETWILER: I think some of these categories are resonating because they are high-frequency categories. Shoppers turn to their trusted grocer for these items for frequent trips and know the quality and value of private brands, so it's easy to pick up those items on those frequent trips.

OFRI: These staple items are purchased in private brands for several reasons: (1) customers find good deals on these quality items, which influence basket since they are frequently purchased, and (2) these categories have been proven to be national brand equivalent. 

STORE BRANDS: Quality was cited as a driver by 42% of shoppers, a jump of 12%. What does this tell us about the product development efforts of retailers?  

BAKER: Private brands are a crucial differentiation strategy for food retailers these days, and they’re working. A store’s brand is very or extremely important for 55% of grocery shoppers when deciding where to shop. As food retailers invest more in their private brand offerings, we’ve seen quality improve, and different products attributed to sustainability and health and well-being have been emphasized. What’s emerging are not only private brand products that meet shoppers’ expanded definition of value but also drive shoppers to your store so they can get the specific private brand offering.

BALIAN: Retailers and wholesalers are stepping up their game in terms of private brands' quality assortment, visual identity, and breadth of innovation. We are leaning on our owned brands as real brands to serve our customers and engage emotively. We are also focused on delivering a robust portfolio across the value tiers from opening-price-point to national brand equivalent, to premium, organic, and free-from, all in service of our shoppers and their diverse needs.  Creating quality private label products, more appealing brand visual identity, and differentiated innovations as a way to drive traffic and increase loyalty to our retail stores.  

DETWILER: Retailers and wholesalers spend a significant amount of time and energy developing high-quality store brand programs that meet or exceed the national brands at a value and it shows. Shoppers see and trust the quality of store brand products, which is a major element of driving repeat purchases and extended purchases of a store brand in other categories.

OFRI: In the post-pandemic world, retailers have had the ability to shift focus from solely supply chain and stock to some of the more exciting parts of own brands, including new product development, innovation, and a multi-demographic approach to product development. In addition, there has been an upward battle to move perception from white label to private label brands, with more focus on increasing quality, value, variety, and developing a specific own brand message for the customer. 

STORE BRANDS: In the survey, 46% of shoppers said they would buy store brand products much more/somewhat more as compared to 27% for national brands. Did consumers provide insight as to why they’re more likely to purchase private brands vs. national brands? 

BAKER: I was in the grocery store recently and saw a mom and son shopping. We were in the cereal aisle, and the son was asking why the store brand of some cereals was so much cheaper—what is different? The mom articulately explained that store brands were similar, if not the same, to many manufacturer brands but often did not have the same marketing budgets, so they cost less. I was impressed with this informed conversation, but I also realized that today’s grocery shoppers are so much more informed about the products they are purchasing and the business practices of the food industry. We also know that shoppers shifted to private brands a lot during the COVID-19 pandemic, and many have decided to stick with the private brand options because they work into their own personal definition of value. 

BALIAN: Private Brands are standing out more than ever. There are several reasons consumers are likely to purchase more private brands including strong availability, appealing packaging design and quality, clean ingredients/ leading certifications, unique flavors and innovations, and low risk (100% guarantee) to support trial and quality.  Lastly, as consumers purchase and repeat private brand purchases in their primary categories, they are more open to trying adjacent or new categories, given the confidence they have in their base category purchases. This positive halo is helping drive increased private brand units. 

DETWILER: I think this goes back to consumers buying into the fact that store brands offer quality products at a value that they can trust in all categories and departments throughout the store. Add in the fact that they also like many of the support elements grocers and private brands are offering via promotions, coupons, recipe ideas, etc., they know they don't have to pay more to get the same or better quality.

OFRI: Consumers believe there should always be a price differential and incentive between private and national brands. Lower prices are a catalyst for consumers to try private brands and often the incentive that builds private brand loyalty over time. Private brands have proven to be successful, which helps customers venture into new categories. The teams managing own brands in-store put a large effort into variety, flavor, and innovation as a way to keep those consumers coming into stores and converting to store brands

STORE BRANDS: Within the feedback from consumers, where are the growth opportunities for private brands?

BAKER: Our research finds that grocery shoppers are looking for their primary stores to enhance private brands in aspects including health and well-being, packaging, sustainability, taste, variety, merchandising, and marketing. Private brands have opportunities to further advance in how they are perceived by making investments in marketing that raise their profiles. 

BALIAN: While private brand unit purchases are at an all-time high, private brands have four key opportunities to accelerate growth including strengthening their assortment and variety, providing a broader portfolio of health and well-being products, and increasing the transparency of their ingredients, sourcing, and sustainability commitments.

DETWILER: The data shows the opportunity for additional product development, flavor extensions, and innovation beyond just what the national brands are doing; driving loyalty to retailers; and continuing to build excitement with promotions and marketing programs. There is a lot of opportunity for cross-merchandising and cross-department selling, leveraging the brand trust established in other categories! 

OFRI: Merchandising: more opportunities to demo and try new own brand items, and a targeted place in store for new items when they launch. Sustainability: more focus on ways to sustainably source materials, and also an effort to reduce waste/ability to recycle easier. Health/better for you: a focus on less calories, more protein, organic/better for you own brand items.

STORE BRANDS: Value and price were still major factors driving shoppers to choose store brands. Is there a bit of a warning here for retailers that may be looking to boost their product development efforts for premium products? 

BAKER: With shoppers weighing convenience, relevance, and experiences along with price and quality when choosing products and where to shop, I think there is an opportunity for food retailers’ private brands to cater to a wide variety of shoppers. Tiering your private brand options is one way to diversify, increase assortment, and ultimately deliver value to a wider audience.

BALIAN: On the contrary. The opportunity to deliver quality products at a good everyday value should remain a top focus of retailers and wholesalers. The opportunity is to create a strong, segmented strategy and portfolio of offerings based on consumer needs, category, and demographic profile of the community being served. Ensuring the right product portfolio across the value-tiers, including categories consumers are willing to purchase premium, higher quality, and with more discerning ingredients remains an opportunity. Brands such as 365 (Whole Foods) to Bettergoods (Walmart) to Wild Harvest (UNFI), better meet consumer needs by offering a selection that offers more products that are USDA Organic, Project NON-GMO Verified, better-for-you, and free-from ingredients.

DETWILER: Value comes at all price points. Premium store brand offerings are a great way to help consumers create restaurant-quality experiences at home that they can feel great about serving to their family and friends without stretching their budgets. I think this shows there is more room for premium or elevated store brand products.

OFRI: I like to segment items into three different categories: staple items (must haves/frequent buys) where price is pivotal for the consumer; should-haves (items that customers need to accompany the staple ones), but not as vital in terms of cost savings and frequency purchased; and the third category includes frill items. These are premium items customers will spend more on because they want to indulge. As retailers, we need to focus on providing customers with really good quality and cost savings in the first two categories, but the third area is where we can really innovate and make a difference in customer perception. 

STORE BRANDS: From a retailer’s perspective, (FMI members), did anything in the results come as a surprise?

BALIAN: The survey helped reinforce the continued relevance and importance of a holistic private brands portfolio and program is critical to help retailers attract and drive shopper loyalty. With consumers remaining financially stressed coming out of the pandemic, a competitive, more appealing, and innovative private brands program remains a key differentiator and competitive advantage if executed well from portfolio assortment, innovation, merchandising, and marketing standpoint.

OFRI: I was pleasantly surprised to learn that 56% of consumers choose a store solely based on private label items. Retailers have made a conscious effort to launch lines/brands that are specifically curated for their consumers. We know our shoppers and ask what they want and try to deliver that. There’s also more labeling consistency across categories with own brands. That means consumers can quickly see claims and ingredients by the brand, understand if it’s organic, better for you, etc. The information is not a surprise, but validation that the own brand community is moving in the right direction.

STORE BRANDS: Do you feel the results in the survey validate the work your teams and others have done regarding developing private brand products?

BAKER: Modern private brand programs are about much more than just a label and offering the lowest prices. They are complex differentiation tools that should be fully integrated into a food retailer’s strategy. Yes, I believe this report shows that private brands have arrived and that consumers will continue to purchase them and find value—however they define it. 

BALIAN: Yes, I do believe the survey results validate the work our teams are focused on in developing private brand strategies, programs, and innovations. While consumers are searching for value, they are not willing to compromise on quality and taste, and search for unique products to support their needs. With the accelerated growth, trial and repeat behind private brands over the past 10 years, retailers and wholesalers can continue to leverage private brands as a competitive advantage to build loyalty through a differentiated and focused program.

DETWILER: Absolutely! The results validate and reinforce the significant effort we are putting into our private brand portfolio of quality products at a good value, as well as our marketing and promotional efforts to help independent grocers attract shoppers with a strong store brand program.

STORE BRANDS: Given the results in this year’s report what more needs to be done for future growth of private brand sales?

BAKER: There is an opportunity to step back and really look at private brand programs from all angles and see how they can fit within the grocer's larger strategy. For example, are grocers training store associates to be private brand ambassadors? Also, consider how private brands play out in the digital commerce experience. By really doubling down, food retailers can expand the integration of private brands across business strategies. 

BALIAN: Increased retailer and wholesaler focus on building holistic private brand strategies as a competitive advantage and differentiator, as part of their retail strategies.  Private Brands can and should be leveraged as more than value drivers, but also as a means to drive traffic and basket dollars through quality, innovation, and relevance.  Scaling investment in marketing and awareness through more deeply embedding private brands into in-store merchandising, marketing, and digital strategies like a strong presence in Retail Media Network programs. 

DETWILER:  I think this is simple. We all need to keep our foot on the gas pedal; keeping store brands with a strong portfolio, assortment, and great quality front and center for the consumer.

OFRI: A lot of work has been done in the private label community for better advocacy and collaboration across retailers (FMI, PLMA, etc.). Additional visibility, community, and advocacy will help educate consumers on the benefits of store brands and make it easier to launch and source new own brand items.