Store brands, Private Label or Private Brands is a massive segment of the food and beverage sector.
You will find Trader Joes, Kroger, Archer Farms (Target), Great Value (Wal-Mart), and 365 (Whole Foods) as a small sampling of some of the more well-known private brands. Some have the retailer name and others a brand name unrelated to the retailer banner name.
The Private Label Customer Profile
A 2014 Consumers Reports study showed a whopping 93 percent of American women surveyed buy store brands to save money.
The Private Label Manufacturers' Association (PLMA) Study of Who is The Primary Shopper says women still dominate. According to PLMA “Aside from meal preparation and grocery shopping, women are also responsible for the other important household areas: Seven in ten women say cleaning the house is their job and three-fourths take on the majority of the laundry in the home. Since women are those making the purchases, they have become frequent store brand purchasers, with only three percent saying they never buy store brands.”
Private Label Growing in All Channels
According to the PLMA, "private-label sales grew 2.5% in 2014, versus 1.1% for national brands." A Wells Fargo analyst John Baumgartner reports Kroger's projection that its Simple Truth private label brand, now at approximately $1.2 billion in annual sales, may double in the next few years. The Sprouts Farmers Market private label house-brand sales are skyrocketing as well.
When you shop for foods you can see for yourself that store brands are growing across all channels. According to the PLMA “Looking beyond traditional supermarket outlets… no-frills retailer Aldi and Costco Wholesale, specialty chains like Whole Foods and Trader Joe's, as well as convenience stores… likely produce a grand total in store brand sales of more than $120 billion.”
So are store brands better? PLMA says "most consumers see no difference between private label and national brands."
The Hartman Group Ideas in Food: A Cultural Perspective report shows how private label pervasiveness is changing consumer behavior at a retail grocery.
According to the Hartman Group "...it's no surprise store brands give national brands a run for their money: "In many instances, shoppers no longer can distinguish between national and private label brands. What's most interesting is not so much the fact that it's happening, but that people don't really care that they don't know the difference."
The Economy as a Driver for Consumer Behavior
PLMA also notes that private label's robust growth is driven by the recession. Affordability has permeated consumer purchases and Private Labels can be 25% to 50% less than the equivalent national brands. National brands are trying to deal with consumers new shopping habits since the national brands are losing market share they lost to store brands over the previous years.
What Retail Food Shoppers Say
The PLMA Private Label Yearbook provides lots of sales, unit and gross margin data. Consumer research by PLMA, GfK/Roper says US consumers are going to stick with store brands.
More than 50% said they buy more store brands today vs. last year and also describe themselves as frequent store brand shoppers. The clincher for national brands: 80% of shoppers believe private label are as good as or better than national brands.
Tips for Food Entrepreneurs to Grow With Private Label
Brands that specialize in creating private label food lines are winning thanks to strong demand for their low-cost production and branding abilities.
Here are some valuable tips for entrepreneurs wanting to start a food business that is different from cheaper private label foods:
- Start paying attention to what you see on the shelf for store brands
- Are you seeing more private label products as you shop?
- Are you seeing more and different products under the store brand?
- Visit the aisles of Trader Joe's to get inspiration for new product launch ideas since they have an aggressive program of finding smaller specialty foods companies to make interesting and not to be found anywhere else products under the Trader Joes brand name.