The rise of store brands
Why buy Progresso, when Aldi soup is cheaper?
Pittsburgh Post-Gazette
Grocery stores have come a long way when it comes to store brands. Years ago, offering shoppers a generic brand often meant the plainest packaging for customers looking for a bare-bones price point.
But as the market evolved, not only did stores offer higher quality private label brands, but more shoppers began looking beyond national names.
“Millennials — one of the largest adult demographics — are innately less loyal when shopping and can distrust national brands,” according to a recent report from Bloomberg Intelligence.
Locally, Giant Eagle has invested for years in several brands
at multiple price points: Market District, Nature’s Basket, Valu Time and Top Care.
Overall, companies are taking a “broader stance with what they offer,” said Matt Lachut, senior director of marketing for the O’Harabased grocer. “It’s gone from simple white packaging with black lettering that says ‘potato chips’ to something that offers a great value.”
Mr. Lachut started working at Giant Eagle about 15 years ago, when the company was launching its Market District line, which focuses on different flavor profiles, and Nature’s Basket, which provides organic options.
Private label sales industrywide have been increasing for the past five or six years, according to Mickey Chadha of Moody’s Investors Services, with successful grocery stores clocking in sales in the mid-20 to 30 percent range.
Kroger, for example, sells about 28 percent private label brands, which is the publicly traded grocer’s biggest selling product, Mr. Chadha noted. Whole Foods, owned by Amazon, offers its own line dubbed 365. Walmart and Target have their own labels.
“It’s a value proposition for the consumer and the margin for the grocery store is about 12 to 15 percent higher than a branded label,” Mr. Chadha said.
Another driver for store brands is the growth of deep discounters like Aldi, which offers predominantly store brands on its shelves and is expanding rapidly across the country, Bloomberg Intelligence noted.
Another push came from consumers who became more cost sensitive during the Great Recession and then kept the habit.
“During the last downturn when consumers were trading down, private label products became fairly compelling,” Mr. Chadha said. “As the quality improved, so has consumer acceptance of them.”
While the competition may be hitting national brands like Procter & Gamble — the maker of Tide, Old Spice and Herbal Essences — and General Mills — the company behind Cheerios, Yoplait and Pillsbury — those name brands aren’t going away yet.
“Those companies that sell branded products will have to lower pricing,” Mr. Chadha said. “Many have bought other brands to expand their own product lines that resonate with customers. Those brands aren’t going away, but they will have to change how they price their products.”
Going forward, seeking out unique products is a key for store brands, said Mr. Lachut of Giant Eagle.
“Artisan suppliers, microproduction facilities. The world has a lot more folks making things with more flavor profiles,” Mr. Lachut said. “Any program is built on how well you can source those product lines.”
Stephanie Ritenbaugh: sritenbaugh@post-gazette.com; 412-263-4910..