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Back to the news list How Retailers Can Get a Leg Up on Private Label
30 July 2018 - Media Release - Winsight Grocery Business

When it comes to driving shopper loyalty by offering more transparency, unique items and on-trend flavors, the possibilities are endless in the arena of private brands, which increasingly share the shelves with their national brand counterparts across the U.S.

According to Stamford, Conn.-based Daymon Worldwide’s 2018 Private Brands Intelligence Report, 53% of consumers say they shop at a store specifically for its private brand selection, while in 2017 more than 7,500 new private brand items launched in the U.S.—about 7% of all private brand items sold.

Indeed,  Food Marketing Institute and IRI's the Power of Private Brands studyhighlighted a dramatic increase in private brand performance, posting annual sales of $138 billion across U.S. multioutlet and convenience-store retail channels in 2017. According to the report, this increase has been largely driven by the fact that retailers have been elevating their private label offerings, leading to improved consumer perception of the category. 

The most successful and forward-looking retailers are those that use their private brands as a “driving force behind innovation,” the Daymon report says.

Private and Premium  

In recent months, numerous retailers have been upping the competition with the release of private brand lines that offer global flavors and premium offerings.

For example, Keasbey, N.J.-based Wakefern Food Corp.’s ShopRite banner is giving its private label selection a global makeover with its new Trading Company line. It’s described by the retailer-owned cooperative as a mix of “inspirational, artisanal and distinctive” goods that feature imports from around the world and can be found across the store, from center shelves to frozen and dairy.  

Additionally, Boise-based Albertsons is working on the launch of its premium Signature Reserve line, which is offering seven craft ice cream flavors made from globally sourced ingredients out of the gate. It plans to add ultrapremium pasta and pasta sauces imported from Italy, single-origin packaged coffees from Sumatra and Nicaragua, and four varieties of hand-picked loose-leaf tea as 2018 progresses.

Ahold USA brands including Giant and Stop & Shop also jumped on the premium and private bandwagon with the recent launch of its Taste of Inspirations line, which includes more than 85 handcrafted items, such as pasta sauces, frozen appetizers, dressings and marinades.

You Snooze, You Lose

This strategy to be first to the game with on-trend and in-demand signature private items is crucial, according to the Daymon report; for example, Trader Joe’s launched its own brand of Icelandic yogurt at the same time many retailers were only beginning to offer private brand Greek yogurt.

Being “late to the game,” the report says, can have “noticeable impacts on performance.” A prominent retailer that waited to launch its own line of Greek-style yogurts lost 21 private brand net share points lost in the category over the past decade. Compare that to a leading retailer that was first in the nation to enter the Greek yogurt private brand space and saw its share grow by 12 points.

“That’s a considerable swing, and a big miss for those slow to adapt to new trends,” the report says.

The Wellness Takeover Continues

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Among the premium trends, wellness and fresh items are the golden children of the mix. For example, “best-in-class” retailers carry nearly twice the number of private brand wellness items compared to the industry average of 23%, which is a game changer considering that 41% of consumers are requesting better-for-you ingredients in private brand products, according to the Daymon report.

Case Fisher, CEO and president of Fischer & Wieser, a specialty food brand and private label producer based in Fredericksburg, Texas, says retailers need to focus their private label selection on price to compete with the No. 1 brands. But they also need to think outside of the box by expanding these offerings to areas such as the dairy and meat departments, where they can “differentiate the product mix a little more successfully and have a little bit of a higher ring,” he says.

“Where they maybe didn’t think that they could compete, coming up with a product that’s unique, and having something of value to add to the meat department or deli, something that isn’t just isn’t a me-too product” can bring success, Fisher says.

Lakeland, Fla.-based Publix, for example, has started to move its own brands into the fresh section, and it has even breached the meal-kit barrier with the gradual launch of its Apron’s fresh kits selection over the past year, complete with on-site culinary experts that work to create original recipes.

Owning the National Brands

Retailers rarely have the big bucks to advertise their private brands as national brands do, and forgoing these campaigns is often what allows them to keep these items affordable. However, there are plenty of opportunities to convert shoppers without draining the bank.

For example, telling a story about a private brand and where it comes from is a great opportunity for retailers to get private brand items noticed.

Patrick Moorhead, CMO of Label Insight, which is working to expand the GMA and FMI-run SmartLabel initiative, says providing detailed information about products through this program can be a “brand canvas moment for a private label brand” and allows them to talk about “their cage-free-egg strategy, or their family farm soybean farm field strategy or their commitment to ecologically sustainable farming or whatever the case may be, without doing a TV commercial and with the same credibility that a label provides to the consumer.”

Don’t Miss the Transparency Train

This standard is only going to grow, Moorhead says. Label Insight recently entered into a “massive enterprise relationship” with Topco Associates—which Moorhead says has “more buying power than Walmart” across categories—that aims to enable the feature for all of its more 65,000 products within the next 18 months to two years through what has been dubbed the Topco Product Transparency Initiative. Albertson’s is also working with Label Insight to implement SmartLabel across its private label portfolio and part of its own transparency initiative.

“I think that retailers increasingly are sort of on the hook to provide consumers with more information about products,” he says. “While retailers don’t have the ability to influence national brands that much, they do have the ability to do that with private label, and they are.”

Moorhead advises that there’s an increasing correlation between brands that fulfill the demand for transparency and consumer loyalty and repeat purchase. Recent data from Label Insight shows that on a 52-week longitude, brands that enable themselves with SmartLabel are in aggregate growing at about 10% across the store, he says.

A Great Opportunity for E-Commerce

Moorhead says that while he hasn’t seen SmartLabel being used among e-commerce strategies at this time, “there is probably a tipping point in the near future when all of these factors move into e-commerce strategy.”

When using grocers’ ever-growing online shopping functions, there is almost always a lack of nutritional and background information about the product, Moorhead says, making it even less transparent than buying in-store because you can’t pick up the item and study its label.

If and when SmartLabel is incorporated into these e-commerce offerings, “consumers will respond to that and it will drive interest, surprise and delight,” he says. If retailers use this transparency option for private label selections and sprinkle reminders throughout a digital experience informing shoppers that these products “have an edge,” then national brands will “have to catch up,” he says.

Kroger Elevates Nonfoods Private Brands

Kroger has maintained a heavy focus on its Our Brands portfolio as it continues to work through its Restock initiative, and is now moving these efforts into the nonfoods section. 

The retailer recently partnered with fashion designer Joe Mimran, designer of the Joe Fresh line for Canada's Loblaw Cos. as well as Club Monaco and Pink Tartan, to launch its Dip fashion line. 

The new line will overhaul Kroger's dozen-plus existing private label clothing brands and will debut in 300 Marketplace and Fred Meyer stores this fall. 

Additionally, Kroger launched Bromley's For Men shaving and grooming products, which will include premium razors and replaceable blades, shaving accessories, and skincare. 

Walmart Pops the Cork on Private Label  

Eyeing better penetration and higher quality in a strategically important category, Walmart is uncorking a new approach to its private label wine program.

Its new Winemakers Selection line is a curated collection made for Walmart by winemakers working directly with the retailer’s buyers. Officials said the new approach—one used successfully by competitors such as Trader Joe’s, Lidl and Aldi, all of which have made affordable but well-regarded wines a leading element of their brands—would help to build its own reputation for quality at a value.

“In the past, we would canvass the world and figure out what was available and what we could do quickly at scale,” says Al Dominguez, SVP of merchandising. “We took a slightly different approach in working directly with winemakers.”

Dominguez describes the line as “wines that outkick their coverage,” retailing for about $11 each, “but drink like a $30 bottle of wine.”

Walmart is currently “undershared” as compared to peers in the wine space, Chief Merchant Steve Bratspies says.

“We are looking to get up to parity,” he says. “And if we get up to parity, we’ll have some opportunities to do some things.”

Bratspies says wine was a crucial category in reinforcing an image of quality that has been a focus of Walmart as it gets its grocery business in shape. Wine comes with the benefits of providing merchandising opportunities, can draw trips and can help to put an “extra item in the basket,” Bratspies says. Wine is also trending well with millennial shoppers, he said.

The company is looking to accompany the new wine selections with the appropriate real estate in stores, he says.

“It’s how we display it, but also about making sure we have the pure linear square footage to carry the breadth of assortment we need,” he says. “We are also working on the experience, looking for different ways to present the product.”

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