The New York Times has a piece this morning about the growth of grocery private label:
"Large food companies gobbled up market share during the pandemic. With supply chain issues affecting what was on the shelves, people were buying basically whatever they could find. And they kept buying even as prices soared when the food and beverage brands raised prices to maintain their profit levels while still covering rising ingredient and labor costs.
"But with retailers now expanding their store-owned food and beverage offerings, consumers are slowly shifting their spending. Overall, private-label foods and beverages have crept up to a 20.6 percent share of grocery dollars from 18.7 percent before the pandemic, according to the market research firm Circana."
The Times writes that "a deeper look at some categories reveals private-label goods are gaining significant ground on national brands. Private labels snagged 38 percent of canned vegetable sales in the three months that ended June 30, according to Numerator, another market research firm. Numerator’s data also shows private-label cheese held 45 percent of the market and coffee nearly 15 percent.
"The shift in spending reflects a customer base that is nearing or at its tipping point. Inflation, which climbed to 3.7 percent in September, is running at a less-rapid pace than a year ago, but millions of shoppers still face increasingly high prices in grocery stores.
"The trend is having a greater effect among those with lower incomes, who spend a greater share of their paycheck on food, even as a pandemic-era policy that increased the amount of money that food-stamp recipients received over the last three years has ended. This month, payments on federal student loans, which had been on pause for the pandemic, also resumed. Adding to the financial burden, rates on credit cards and mortgages are rising.
"Two-thirds of consumers said in July that they bought less-expensive groceries at retailers, an increase of four percentage points from a year earlier, according to the consulting firm McKinsey. The shift, the firm said, was particularly pronounced among those with incomes less than $100,000 in categories such as meat, dairy and staples."
- KC's View:
The manta around here, pretty much from the day we launched MNB almost 22 years ago, has been that retailers do better when they can find products and services that differentiate them. Growth is limited when you're focusing on the products that everybody else is selling, whether for a nickel less or a dime more.
A great private label is part of that. And I've always felt that this is more than just identifying categories where own label items can undercut on price. Rather, it should be part of a broader strategic vision that focuses on the retailer's overall brand identity and value proposition. It has to be big picture thinking, big picture action.