Private label brands see renewal amid rapidly changing shopper behavior

Grocery retailers have seen seismic change in 2020, and in this change there are two macro-trends impacting private brand strategies as retailers seek to acquire new customers and build loyalty with their own brand assortments.

One of the most significant changes related to shopper behavior has been the increased propensity of shoppers to leverage grocery e-commerce. What was a steadily growing trend pre-pandemic has accelerated dramatically, with the number of active monthly online grocery shoppers almost tripling, and monthly online grocery revenue increasing over six times versus 2019.

Another area of rapidly evolving shopper behavior is the trend toward products that meet specific health, wellness and values-based need states. What lands in shoppers’ baskets is changing as a result, as they increasingly seek health and wellness products.

Large swaths of the U.S. population are now shopping to fulfill evolving dietary needs with 200 million Americans adhering to a particular diet or health-related eating program and 180 million shoppers shopping with food allergies or intolerances in mind.

Looking at these trends, here's how private brands are adjusting or need to adjust to these new shopper behaviors:

Private label brands increasing in importance
First, private label brands have come more into focus in 2020 as a result of COVID-19. Many retailers have experienced unexpected private label growth this year as shoppers look for cheaper options in the face of economic uncertainty, or try store brands when their preferred choice is out of stock.

A September 2020 McKinsey study confirms this: The top two drivers of consumer purchase intent for private label brands are “private label brands are a better value” and “I purchase private label brands only when national branded products are not available.”

Private brands are playing an increasingly important role in retailer strategic planning as creating repeat purchase loyalty amongst shoppers who have recently tried private label brands, even if by accident, and they represent material improvement to overall profit margins.

But, private label brand loyalty and basket growth is dependent upon creating differentiated engagement with shoppers across channels, especially e-commerce channels.

Health and wellness differentiation through private label brands
The consumer trend of shopping based upon health and wellness need-states greatly impacts private label brands. McKinsey has found consumers believe private label brands are healthier and safer — the third largest driver of purchasing intent.

Leading retailers are tapping into health and wellness as a private label differentiator that appeals directly to the growing consumer trend of shopping based upon health and wellness need-states like “keto,” “paraben free,” “heart healthy,” or “sustainable.”

Walmart’s "Great For You" health and wellness program applies an icon to qualifying Great Value and Marketplace private label products that meet stringent nutritional standards. This is a great way to call out the differentiation. Target's health and wellness icon program connects need-state shoppers with private label options across categories, including private label food brand Good and Gather, featuring icons like “vegan” or “plant based." Private label personal care brand Everspring features icons like “cruelty-free” and private label household cleaner brand Smartly features icons like “clean.”