State of the Industry 2021: Numbers Show Private Label Soaring in Key Categories
How are private label sales faring? Most say that the category has done quite well over the course of the COVID-19 pandemic and some add that that momentum should continue well beyond the hopeful end of the crisis.
But, individual categories have different track records over the last year. For example, the frozen foods segment realized its highest sales levels in years thanks to a dramatic decline in in-restaurant dining. Bakery foods, on the other hand, declined on the year, likely due to bakery departments closing during key pandemic months and shoppers not being comfortable buying unpackaged items.
After talking with retailers, studying quarterly reports and getting exclusive insights from Chicago-based market research firm IRI, Store Brands has identified the highest-performing food and nonfood categories to break out during the pandemic.
Perhaps not surprisingly by now, many categories that are driving private label are part of the “stay-at-home lifestyle,” as described by Pam Ofri, director of product development and operations for own brands at Wakefern Food, which saw its biggest category increases in breakfast foods, frozen foods and anything to help shoppers cooking at home.
In nonfoods, what IRI classified as nonedible private brands, annual sales picked up for categories reflecting the home (paper towels, toilet tissue, paper cups and plates) and hygiene, like hair care and the shaving category — possibly driven by consumers concerned with how they looked on Zoom.
Bill Smith, director of Our Brands for Buffalo-based Tops Friendly Markets, said all of the retailer’s private label categories were in the black in 2020. “The household categories clearly saw record increases,” he said. “Other bright spots were baking and pantry style items as well as some great results in perimeter fresh departments. These categories rose to the top due to restaurant restrictions, curfews, consumer anxiety, and remote working/schooling which increased at-home eating habits.”
Tops launched more than 200 new store brand items last year, despite COVID-19, and the unit sales of its Our Brands were “strong double digits over prior year,” he said.
Ofri said Wakefern’s new products augmented the breadth of its Bowl & Basket and Paperbird lines that were introduced at the tail end of 2019. “We have been gradually launching additional categories over time,” she said. “However, our sales and private label unit penetration have increased, so we are performing ahead of schedule.”
The largest chains also reported big 2020 results. Kroger, for example, reported in February that its Our Brands division had its “best year ever,” per comments from chairman and CEO Rodney McMullen delivered during the company’s most recent earnings call. He reported that private label sales at Kroger exceeded $26.2 billion in sales last year. Simple Truth — a cross-category brand — surpassed $3 billion in annual sales.
Albertsons recorded 25% own brand penetration in its most recent quarter, and Target reported in its fourth-quarter financials that four of its private brands — Cat & Jack, Up & Up, Threshold and Good & Gather — earned more than $2 billion in sales. The mass retailer has more than 30 own brands, and 10 of them generated more than $1 billion in sales.
From smaller retailers to larger ones, life is good in the private label department. Here’s a closer look at some of the strongest categories.
Frozen Foods
According to the “Power of Frozen 2021” report from the American Frozen Food Institute and FMI - The Food Industry Association, frozen food sales grew in dollars (up 21%) and units (up 13.3%) with nearly all types of frozen foods seeing double-digit sales increases.
“Frozen foods are a pandemic powerhouse, ringing in $65.1 billion in retail sales in 2020,” said Alison Bodor, president and CEO of Arlington, Va.-based AFFI.
IRI’s president of strategic analytics Krishnakumar “KK” Davey said within private label foods, frozen foods had the strongest gains, increasing sales by 32% over the prior year. Private label refrigerated foods were up 23%. He said the frozen seafood category, in particular, took off. IRI showed that private label frozen seafood increased in dollar growth year over year by 41%.
Also impressive, private label frozen and refrigerated processed poultry was up 37%, private label frozen soups and sides increased 36%, and private label frozen appetizers grew by 32%.
The Cheese Business
Davey said private label grew in categories that had a strong presence in food stores and natural cheese was right there, along with frozen seafood. In dollar growth, the private label natural cheese category grew 22% in 2020, per IRI.
The Parmigiano Reggiano Consortium, based in Italy, reported that production of Parmigiano-Reggiano cheese hit record highs in 2020, up nearly 5% year over year, adding to a near-8% growth in Italian sales and 10.7% sales growth in other countries. The organization said 3.94 million wheels of cheese were produced in 2020, and the U.S. market saw roughly 2% growth in exports. It makes up 20% of the consortium’s overall exports.
Get Cooking
Other categories that stood out in the IRI report among edible private brands listings all had to do with heavy activity in the kitchen:
- spices and seasonings saw a 32% year over year increase in dollar growth;
- sugar saw a 20% increase in dollar growth;
- shelf-stable vegetables grew by 20% in sales;
- flour and meal saw sales increase by 31%;
- and bread crumbs and batters increased by 30%.
While not the powerhouse categories within food, some smaller private label categories had noteworthy gains in 2020, according to IRI, including frozen baby food, which soared 659% in dollar growth; ham’s 467% year-over-year dollar growth; and shelf-stable egg substitutes, which jumped 289%.
Nonfoods
The high demand in supply-constrained categories like toilet tissue and household cleaners stood out in nonedible private label growth, Davey said. This is not surprising given the media coverage of shoppers hoarding toilet paper early on in the pandemic. In sales growth, private label toilet tissue grew 24%, per IRI, and private label paper towels grew 26%.
However, some unusual growth in other private label categories cemented what life was like in lockdown, like a need for shaving lotion and men’s fragrances, up 170%; personal thermometers, up 87%; and hair conditioner, up 69%. And to keep the house smelling right, private label candles were up 48%.
Household cleaners also drove private label sales, with sales climbing 44%, while household cloths were up 58% year over year. Other items like bleach saw a jump in sales by 38%, and sponges and scouring pads were up 36%.
According to IRI, consumers spent a greater share of their budget on private brands in 2020, and the category success backs that up. IRI said nearly $1 out of $5 went to store brands, and store brand sales growth modestly outpaced name brands in 2020, up 13% compared with 12% for name brands.