While private label’s dollar share of the US CPG market (for food and beverage) has hovered stubbornly around 20% in recent years despite predictions that it was only a matter of time before it approached the super-high penetration levels of some European markets, it has dropped during the COVID-19 pandemic, said Dr. KK Davey, president client engagement at IRI.
“Private label gained share last year in Q1 and Q2 during the early phases of the pandemic when everyone bought everything, and emptied store shelves,” he told FoodNavigator-USA.
“But it lost share in four quarters from Q3 2020 to Q2 2021 due to just-in-time inventory, supply constraints, and production constraints. Some retailers did well, but others who did not have their own capacity did not do well.”
So what happens now? “We expect private label and quality products that offer value to do well in the coming quarters due to high inflation, and less stimulus money,” predicted Davey. “This will lead to consumers looking for value and shopping value products in value channels.”
‘We have been intentional to grow a line of iconic brands in-house, not just churn out ‘me too’ products’
Albertsons - which has an extensive array of private label products and sub-brands including its core Signature line, Open Nature (no artificial colors, flavors, sweeteners) and O Organics (USDA Certified Organic) – recognizes that private label plays a key strategic role both in driving consumer loyalty and differentiating the retailer from rivals, said VP of brand and marketing, Katie Ceclan.
Which means selling more private label products you can't buy anywhere else, not just cheaper versions of national brands: “Our own brands team operates like a CPG company inside of a retailer. We have been intentional to grow a line of iconic brands in-house, not just churn out ‘me too’ products.
“That investment shows in the numbers. Own brands sales penetration has surpassed 25% penetration and our goal is to grow to 30%.”
Ceclan added: “We know that private brands often drive shoppers’ choice of retailers, so we are working really working hard for our own brands to become the number one reason people choose to shop with us, in-store or online.
“In just 2021, we have launched over 400 new own brands items and are on track to reach our goal of launching over 800 items this fiscal year.”
‘Our version of a homerun is when we can deliver a product shoppers want that they’ve never seen on shelf’
So when Albertsons sees an emerging category (cauliflower crust pizza, parmesan chips, cashewmilk), how does it decide at what point it makes sense to introduce private label products? And what’s the criteria for deciding whether it makes sense to launch a private label version?
“Our version of a homerun is when we can deliver a product shoppers want that they’ve never seen on shelf,” said Ceclan.
“Soleil + Caffeine, introduced early last year, is a great example of that kind of first to market launch. Our insights pointed to a gap in beverages for shoppers who wanted flavorful options in sparkling water, but with a boost. The response to Soleil + Caffeine tells us we’ve hit a bullseye and national brands have been following with similar offerings.”
'We see a renewed interest in home cooking which we are answering with new meal solutions and premium products'
Other growth areas right now are around simple home cooking, she said: “Home is the hub these days. We see a renewed interest in home cooking which we are answering with new meal solutions and premium products. In the last quarter we rolled out RESERVE Premium Pastas [see pic below] which are hand crafted, small batch in Italy. They stack up to any national brand premium pasta, but at a value.
“As more meals are eaten at home, we have a big opportunity to bring shoppers high quality and value in prepared foods. This year we’ve added to our portfolio of meal solutions with products that are ready to eat, ready to heat, or ready to cook. Open Nature Savory Skillet meals, Open Nature Cauliflower Crust Pizza and Signature Select Egg Bites are all great examples.”
The company has also begun to test a concept called Ready Meals on the West Coast, “fresh, delicious and affordable meals that are ready to go – no prep or cooking required,” she added.
‘Our in-house model gives us unique speed and flexibility in innovation’
Asked how quickly Albertsons can move to create a new private label product from concept to launch, she said: “Our in-house model gives us unique speed and flexibility in innovation. Not only can we get items on shelf very quickly, but we’re also able to make last minute changes which has been essential throughout the pandemic.
“The launch of our new Open Nature Savory Skillets last fall is a great example. With home cooking on the rise, these skillets were designed as convenient one pot meals like stews and pastas that could be purchased in a ‘Scoop and Weigh’ model to serve different family sizes.
“Near the end of development, it was clear that COVID-19 health and safety guidance meant that prepacked meals were the right choice for our customers, and we were able to successfully change course. These 12 items have been a hit with customers and have been recognized as a standout private label innovation by Store Brands' 'Game Changers' awards.”
Plant-based growth opportunities for private label
As for plant-based meat and dairy, is there a growing opportunity for store brands to distinguish themselves in this arena?
“Plant-based is a fast-growing category with lots of runway ahead,” noted Ceclan. “This has been true for years, but now we know that 38% of adults are placing a higher priority on healthy eating since the COVID-19 outbreak and we’ve added several plant-based products as recently as this summer, including Open Nature plant-based patties made with 20g pea protein and Open Nature Frozen Non-Dairy Frozen Desserts.”
Building loyalty and affinity for private label in the digital aisles
As for online shoppers vs in-store shoppers, she said, “Albertsons Companies is after omnichannel growth and digital is an increasingly important part of that strategy.
"We recently launched a unified app, refreshed our shopper loyalty program, and began offering FreshPass - our exclusive unlimited grocery delivery service with members-only perks. We’re using these channels to build loyalty and affinity for our own brands in these digital aisles.”
"If you look at our brands, Simple Truth and Private Selection continue to really gain share and grow. If CPGs are passing through inflation that's not real, every time when somebody does that, our brands gain incremental share.
“The other thing that I've been really proud of our team is the innovation behind the product and we've introduced over 140 new products in the quarter and would continue to expect that going forward… The business we're gaining right now is really being created because of the innovation in our product and the quality of the product.”
Rodney McMullen, CEO, Kroger, Sept 17 Q2 earnings call
“I think private brand will play an even bigger role in our innovation going forward… I think we do have differentiation.”
Jack Sinclair, CEO, Sprouts Farmers Market, Nov 5, Q3 2021 earnings call
"Albertsons has put tremendous care into building a portfolio of more than 12,000 items that have become pantry essentials – some with a near cult following with both our shoppers and our associates. That’s a big reason we launched the Fresh Picks Product Awards. These draw on top rated customer-reviewed own brand products and give fans a chance to vote for their favorites.”
Katie Ceclan, VP brand and marketing, Albertsons