Private labels taking share from national brands

Consumers continue to opt for private label products while developing new behaviors such as switching brands more often, picking products whose price is lower, and buying products in bulk rather than individually. Data also show that sales of private label products are growing at three times the rate of brand name products.

The decline in supermarket sales volume has continued unabated in 2023, with data from market research firms showing that this drop reached 1.7% in the first quarter of the year. At the same time, turnover has shown an increase of 8.9%, with the growth being purely inflationary since the increase in prices per item came to 10%.

According to the data presented by Panagiotis Boretos, vice president and managing director of market research company Circana (formerly IRI), at the Food Retail Summit 2023, the share of private label products sold during the first quarter of 2023 amounted to 17.7% (excluding Lidl), while in the corresponding quarter of 2022, it was 16.1%.

The sales volume of private label products increased by 4.7% in the first quarter of 2023 compared to the corresponding period last year, while at the same time, brand name products decreased by 2.7%. Although prices of private label products grew 14.8% compared to a 9.6% rise for brand name products (Q1 2023), consumers are increasingly opting for them as they are still around 30% cheaper.

Private brand purchasing is growing amid rising grocery inflation, with 41% of shoppers surveyed this spring saying they bought more store brands than before the pandemic. Among customers who said they bought more private label products, more than three-quarters (77%) said they plan to continue adding store brands to their carts, according to FMI’s new store brands report.

While value and lower cost continue attracting shoppers to private brands, factors such as quality and taste also encourage customers to purchase them. As inflationary pressures worsen and the economic outlook darkens, an uptick in private-label consumption can be expected as shoppers look for more ways to stretch their dollars.

What can brands do?

Now is an excellent time to analyze your pack sizes to play with value dynamics to keep value-conscious consumers buying your brand. Brands can win by identifying incremental packs the retailer doesn’t carry within their private label offering. Or maybe the time is right to think about ways to bundle products that will provide solutions and/or savings to consumers or mimic the club mentality of stocking up at savings. Or maybe it’s figuring out how to bundle your brand with a complementary private-label product and then promoting it via a banner ad on the retailer’s site.

Focus on retention-based tactics to try to limit brand switching. As shopper trade-down activity heightens, it’s more important than ever to stay in the consideration set and win re-purchase. If you are not already doing so, shift your focus to more retention-based tactics. Invest in subscription programs, like Amazon’s Subscribe & Save, and other lock-in mechanisms (e.g., “buy again” lists). Also, leverage any acquired first-party data to retarget your current customers with reminders on items they’ve bought already to upsell or basket build.

Leverage Ratings & Reviews, online and offline. Consumers prefer brands they know and trust. This is why product reviews are among consumers’ top criteria when purchasing items online. It’s also why it’s essential to leverage your thoughts as much as possible—across your PDPs, in your content, and even on the store shelf. It can help your products shine versus private brands; it’s also often a key criterion driving retailer search algorithm

Keep tabs on your share of Page 1 of Google versus that of the competition—including private brands—for your top general and branded keywords. Be sure to monitor changes over time and watch for any unusual trends. This way, you can take appropriate measures, e.g., stepping up paid search or investing in organic search, when needed.s. So be sure to closely track your Ratings & Reviews: Look for and address any new negative reviews; stay on top of study recency or currency; and boost reviews via syndication to differentiate and power search.

Many consumers still want to buy “their brands” and accept this may mean waiting until their brands go on sale or buying them less often. At this moment, as consumers are considering more solutions to save money, private-label brands have an opportunity to help consumers navigate these inflationary times. However, retailers are finally pushing against brand price hikes and launching premium private-label brands.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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