Innovators, not imitators: Daymon discusses the rise of private label
Already well positioned entering into 2020, private brand popularity has soared during the pandemic – 89% of consumers report that they trust private brands as much as national brands, and 86% view private brand quality as equal to or better than national brands – and its trajectory will continue into 2021, predicted Aimee Becker, senior vice president, strategic advisory at Daymon.
In its 2020 Intelligence Report, Daymon found that private brands registered $183bn in annualized sales accounting for 19.2% of dollar share (a 5% increase from the year prior) and grew at a rate of 2X faster than national brands.
According to Becker, consumers who may have only purchased private label products in a few specific areas of the store, were opening themselves up to new categories amid the pandemic.
“One of the things that we strongly believe, and our research confirms, is that when people try private brands in new categories it tends to build on that trust. They’re overcoming what might have been this perception of poor quality in certain categories,” Becker told FoodNavigator-USA.
“The more progressive retailers have really recognized that private brands can be a driver of store choice because they provide differentiation and provide consumers with something that is unexpected. You no longer have to nod to, 'I’m just like the national brand'.”
Private label leads innovation
In some cases, private label lines are becoming a destination for shoppers as retailers become more effective in recognizing and tapping into the needs of their consumer base with new and innovative product launches, noted Becker.
According to Daymon, 81% of consumers surveyed say that private brands offer the same if not better unique flavor options than national brands (+8% over the last two years), and 76% of say private brands are just as, if not more trendy, than national brands (+15% over the last two years).
“Those retailers who are really truly seeing acceleration of their private brand program are recognizing that the industry has changed and that these brands needed to be treated as brands,” she said.
According to Daymon’s research, “best-in-class” retailers dedicate 43% of their private brands programs to value-added lifestyle items, compared to the industry average of 16%.
As a result of these efforts, private brands are increasingly being recognized as innovators rather than imitators, said Becker.
Target, for example, has significantly stepped up its private label program in recent years (launching Good & Gather in 2019 and rolling out 700 new SKUs under its newly-launched Favorite Day private brand).
Target's newest private label line, Favorite Day, will roll out nationally in early April serving as sweet and savory complement to its Good & Gather line, which has become a multi-billion dollar brand, according to the retailer.
“Target has been really purposeful in the last few years in how they’ve developed their product portfolio. They’re not a traditional grocery retailer, yet they’re building these really dynamic brands that are filling a consumer need,” said Becker noting how Favorite Day fulfills consumers’ need for a small rewards with a premium assortment of sweet and savory products.
Becker provides another example of Kroger’s Simple Truth line (launched in 2015 which has exceeded $1bn in annual sales, according to Kroger’s Q4 2020 results), and its ability to innovate across multiple areas of the store launching products such as plant-based cookie dough and an oatmilk ice cream.
“Understanding your consumer, thinking about how your products and your brands set you apart and how they provide that differentiation and connection is really the core to growing a strong private brand program,” she said.
Meal-based shopping surge
Across the current private label retail landscape, meal starters, frozen food, and other meal solutions have seen a surge in sales, said Becker.
“We’ve seen some pretty significant surges in meal starters and other meal solutions. Which was very different pre-pandemic when people were planning their meal on their drive home,” added Becker.
Kroger-owned Home Chef meal kits generated record sales in 2020 as consumers continued to seek out food inspiration and quality meal solutions.
The road ahead for private label
Looking ahead to when consumers can freely shop without the safety concern of COVID-19, Becker believes that private label is well-positioned to maintain the growth it gained during 2020.
“I think longer term, there’s been this shift towards what the consumer is expecting, and creating this approachable every day type of item that’s slightly better than or different than what a traditional CPG company is bringing,” she said.
“We do believe that going into 2021 and as things begin to normalize, we’re going to see that trajectory for private brands based on that [2020] trial.”
