Why aren’t private label products thriving amid inflation?

Shoppers have always turned to store brands when economic times get tough. But despite record prices, private label food and beverage sales continue to fall below their national retail counterparts.

Overall, store brand dollar sales held their ground against double-digit dollar gains in 2020, rising 1% by year-end, according to the report 2022 by the Private Label Manufacturers Association (PLMA). At the same time, national brands grew by 2.7%.

By affecting shelf availability, supply issues contributed to slower sales at stores and national brands.

However, according to a January consumer report Per IRI, additional stimulus funds and the reallocation of household budgets have also dealt a blow to store brands by allowing consumers to make more high-end purchases and experience new flavors at home.

Focus on food and beverages

Storewide, dollar sales of edibles totaled $696.2 billion in the 52 weeks ending Feb. 13, national brands (-3.5%) and private label (-5.5%) having seen their unit sales decline year-on-year.

In the central store, the private sector lagged nationally in terms of overall unit sales in the two main categories of edibles – general food and beverages.

The decline coincides with a remarkable year for major CPG manufacturers, which increased their share in 2021 for the first time in five years. Private label GIC unit sales fell 6.6% for the year, compared to a 3% decline for national brands.

Across the scope, unit sales performance fluctuated sharply.

Overall, private labels showed stronger traction with gains in fresh food sections, including seafood, deli meats and fresh produce.

However, according to the IRI report, private brands hold a large share of the perimeter category, where there are fewer options and retailers can narrow the selection down to one option each for private and national.

In percentage share, the top five categories of private label edibles are:

  • Frozen fruit (80%)
  • Chilled pizza (69%)
  • Pies and cakes (66%)
  • Chilled meat (64%)
  • Frozen seafood (62%)

Consumer Considerations

Although private labels are more closely tied to affordability, they are not always the most cost-effective option.

According to a MarketWatch According to Neilson IQ’s interpretation of data, national brands had a higher price for groceries, dairy and meat from central stores in January, but prices were nearly identical on bakery shelves. and seafood. Also, private label items were significantly more expensive in the produce aisle.

Younger generations are also contributing to the slowdown. According to the IRI report, store brand sales slowed across Gen Z (-1.3%) and Millennials (1.0%) in 2021.

Mary Ellen Lynch, director of the IRI Center of Store Solutions Group, identified four main reasons for the decline, as reported Convenience store news:

  • Increase mobility
  • The impact of e-commerce when consumers order familiar products online
  • Discounts on products reducing the prices of national brands
  • Innovation of new products by national brands

Young shoppers are also more likely to seek out companies that offer transparency and information about the products they’re consuming, said Linda Zayer, acting associate dean, faculty and research at the University’s Quinlan School of Business. Loyola of Chicago. food institute.

“Historically, retailers have been successful in attracting value-conscious consumers to their house brands. However, many young consumers…want to know where and how products are made, what ingredients are used, where those materials come from, and the working conditions and environmental sustainability surrounding production,” Zayer said. “Once they’ve found a brand that aligns with their values ​​and needs, they may be less inclined to switch, even if it means cost savings.”

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