Trader Joe's

•  Trader Joe's is a US national grocery chain with approximately 500 stores. The company is a specialty retailer, and its private label brand has garnered significant consumer trust specifically because of the company's established reputation in the private label section.
• Consumer trust in Trader Joe's private label, and consumer satisfaction overall with the company, combine to create a degree of consumer loyalty that one industry source describes as 'maniacal.' Another source refers to Trader Joe's 'devoted fan base' as 'obsessives.' This consumer loyalty is a significant factor in Trader Joe's private label success, since trust in the private label itself motivates consumers to expand into different categories within the label/brand.
•  80% of Trader Joe's products are private label, which has been a major component of its marketing strategy since the company's inception. This high level of private label products contributes to the company's 'low cost + high quality' reputation, and is a key component in the company's pricing strategy.
• Another significant aspect of TJ's success as a private label brands is its reputation for 'unconventional and organic' private label food items. The brand is known for offering 'trendy' and 'unique' products that are distinct and innovative, as compared to the private label products of other grocery retailers. Product innovation and rigorous taste-testing are integral components to this strategy.

Kroger's 'Simple Truth' Brand

•  Kroger is a US national supermarket chain and a multinational general retailer, and it has long been on the forefront of the 'natural/healthy' food movement. The robust financial success of Kroger's Simple Truth private label brand, and the brand's responsiveness to consumer trends, both contribute to recognition of the Simple Truth brand as a private label grocery success.
• In 2012, Kroger launched a new private label brand — Simple Truth — which was intended to tap into the burgeoning organic/natural market. By 2017, the brand had over 1,400 products in its portfolio and was generating $2 billion in annual sales. Simple Truth products are only available through Kroger banner stores.
• As part of Kroger's Our Brands product lines, Simple Truth products are manufactured by Kroger and are rigorously tested, which lends credibility to its assertion of high-quality, 'clean' products.
• Kroger, which has its own data science subsidiary, closely tracks consumer trends and uses this data to inform new Simple Truth product launches. Recent product launches have encompassed different grocery categories, including plant-based proteins, snacks, and beverages.
• In late 2019, Kroger announced an expansion of its Simple Truth line with Simple Truth Plant-Based. The company cites two specific consumer values as the drivers for this expansion: growing consumer preferences both for healthier foods, and for foods with lower environmental impacts.

OVERALL GROWTH REASONS

• One reason behind the recent growth of private label products in US grocery stores is that have more shelf appeal, as well as better quality.
• Previously consumers used to buy generic products to save costs, as such products were regarded as having lower quality than name brands. However, the stigma is fading away quickly.
• Those "generic" products are now perceived to be of higher quality due to "innovations, differentiation, and better packaging."
• The trend in which private label products began to rise and even outpace name brands began in 2017 according to Nielsen's most recent Total Consumer Report, which revealed that private label products grew three times more than branded products by the last quarter of 2017.
•  Euromonitor agrees with the point of view that says the reason for the growth is because private label brands' product offerings are growing "more diverse in terms of quality, taste, and packaging" in a bid to garner some competitive edge. The company stated that focus is shifting from discounting and the use of aggressive promotions by private brands as consumers are now more concerned with product quality and unique offerings.
• Furthermore, "the growth is driven by the expansion of large grocery retailers and the trend towards more sophisticated lines that command higher prices and margins."
• Private Label Manufacturers Association (PLMA) President Brian Sharoff said the growth is a result of changes in the way consumers eat and cook their meals. They want convenience when it comes to foods, and the growing interest in "organic, fresh, and health and wellness offerings" makes them seek to have microwaveable and fresh ready meals.
• Since name brands are producing mass market, they were unable to serve this development. However, due to the more direct relationship that retailers have with consumers, as well as the control they have over "prominent shelf and display space," they can provide unique offerings that appeal more to consumers through these private label products. These consumers now perceive store brands to be more innovative as a result.
• Online shopping is also a driver of the growth in private label sales, as retailers are utilizing "e-commerce to reach beyond their traditional shopper bases and sell store brands."
• Lastly, changes in demographics indicate that millennials are more open-minded than older generations and want to try out new products, including private label products. Since this category is currently thriving by focusing on providing unique offerings and better quality, they are more appealing to millennials who consciously seek value in their purchases and do more product research.

PREMIUM PRIVATE LABEL GROWTH REASONS

• Organic and natural are emerging trends facilitating the growth of premium private-label goods. Private label brands are focusing on the premiumization of products that cater to health, wellness, and food safety, which are currently in high consumer demand.
• As such, "in markets where legislation guarantees production processes and food origin, private-label products granted with production origin labels (such as organic labels or locally produced labels) are responding to consumer demand with affordable premium products and are, thus, capturing a good part of the growth in these segments."
• Also, the premiumization of private label products nudges them closer to multinational brands, thus making the consumer's choice to be centered on the product and its offerings across a broader demographic.

RETAILERS' RESPONSE TO THE TREND

• "The value for money continuum—from premium through to budget -private label—is being stretched, and retailers are innovating quickly to meet shopper expectations, which has strategic implications for brands."
• Large grocery retailers are expanding their brands to include unique offerings that cater to consumer needs and encourages them to come back to their stores for more.
• In other words, retailers are diversifying their private label products and replacing them with better value offerings to drive customer loyalty. As such, "many retailers are now CPG companies."
• For example, Target is replacing its "existing private-label grocery brands, Archer Farms, and Simply Balanced with its Good & Gather brand. Target announced that its products would not contain artificial flavors, sweeteners, synthetic colors, or high-fructose corn syrup, distinguishing the Good & Gather brand from lower-quality private labels." Kroger and Albertsons made similar changes.

FUTURE OF THE TREND

• Going forward, any retailer that does not have a premium private label might be in danger of losing its market. As such, more and more retailers are likely to start adopting premium private label strategies to avoid being flushed out by the competition.
• Multinational brands would also be looking to differentiate themselves and introduce more innovation to their products, to drive brand loyalty, and avoid competing with private labels for prices. Such actions would thus lead to a shift in spending priorities. Rather than focusing on marketing, name brands would spend more resources in their research and development (R&D) departments.