Store Brand Grocery Products: Private Label

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Private Label Grocery Products: Quality Perception

While the growth for private label brands is outpacing that of national brands, U.S. consumers still consider name brands superior to private label brands; however, private label grocery items are more likely to be considered equal to national brands, specifically in the categories of dairy, produce, fresh meat, bakery products, paper products, and bottled water. More details on the perception of private label products are below.

Private Label Brand Growth

  • Consumers care more about the ingredients in a product than they do about the label, which has led to private label brands growing three times faster than national brands since 2017.
  • Following the "clean label" trend, Kroger developed a private label for products that are "free of 101 components that concern the retailer’s customers." This line generates $2 billion of the $20 billion per year that Kroger earns from its private label brands.
  • According to FMI, 97% of all U.S. households purchased a private label product in 2017.
  • A Nielsen study found that 76% of U.S. consumers say that their "perceptions about private label quality has improved over time," which is leading to significant growth in private label sales.
  • The categories of private label brands that have shown the most growth are cooking oil, natural cheese slices, antacid tablets, refrigerated bacon, seltzer and sparkling water, and tortilla chips.
  • Despite the growth of private label brands, though, a study from Acosta found that shoppers still view "national brands as superior to private label brands in most categories." Name brands are considered better than private label brands in 41 categories, including "pet food, beauty & personal care, carbonated soft drinks, coffee, and chocolate."
  • Name brands and private label brands are considered about the same in 12 categories, which include "dairy, produce, fresh meat, bakery, paper products, and bottled water."

Private Labels are no Longer Solely Equated With Value

  • Private labels used to be considered "generic" and were aimed at "financially conservative customers," and while 71% of U.S. consumers still say they buy private label products to save money, private label brands have expanded to include organic, all-natural, and gluten-free products to target customers who demand these specialty items to provide them with a lower-priced option.
  • This may be why 62% of U.S. consumers say that private label brands offer "extremely good value for money," as this indicates they are getting the ingredients they want in products for less money.
  • Moreover, 58% of U.S. consumers believe that "private labels are good alternative of name brand," which seems to show that consumers will buy private label products if they offer the ingredients they want.
  • Overall, about 16% of U.S. customers believe that the quality of private label brands is not as good as national brands. This perception is highest among people between the ages of 55 and 64 at 18%.

Generational Differences

  • Nielsen found that millennials are more willing than other generations to try new brands, which include private label brands; however, generation X consumers purchase the most private label products at 31%.
  • Millennials and younger baby boomers are tied for the second-most private label purchases at 19%, older baby boomers are at 16%, seniors and retirees are at 12%, and younger millennials are at 3%.
  • Millennial shoppers are driven to buy private label products by value, their budget, and promotions (sales).
  • Generation X shoppers are driven to buy private label products by their budget, quality, and value.
  • Baby boomer shoppers are driven to buy private label products by value, their budget, and quality.

Categories of Most Interest for Private Labels

  • A study conducted by Daymond indicates that U.S. consumers would buy more private label grocer products in the following categories: single serve coffee or tea, salty snacks, cheeses, specialty milk, frozen appetizers, frozen pizzas, vitamins, frozen seafood, bacon, value-added meat, deli dips, deli entrees and salads, and bakery cookies.
  • Consumers are open to always or often buying private label brands the following products:
    • Hamburger/Hot Dog Buns: 68% (age 18-34), 69% (age 35-44), 66% (age 45-54), 68% (age 55-64), 62% (age 65+)
    • Hot Cooking and Salad Oil: 63% (age 18-34), 56% (age 35-44), 56% (age 45-54), 56% (age 55-64), 46% (age 65+).
    • Sparkling Water/Seltzer: 50% (age 18-34), 52% (age 35-44), 43% (age 45-54), 54% (age 55-64), 52% (age 65+).
    • Hot Cereal/Oatmeal: 54% (age 18-34), 47% (age 35-44), 44% (age 45-54), 44% (age 55-64), 48% (age 65+).
    • Natural Cheese Slices: 56% (age 18-34), 48% (age 35-44), 40% (age 45-54), 49% (age 55-64), 43% (age 65+).
    • Tortilla Chips: 47% (age 18-34), 39% (age 35-44), 41% (age 45-54), 46% (age 55-64), 41% (age 65+).
    • Bacon: 51% (age 18-34), 41% (age 35-44), 37% (age 45-54), 42% (age 55-64), 37% (age 65+).
    • Salad Dressing (shelf stable): 40% (age 18-34), 34% (age 35-44), 38% (age 45-54), 40% (age 55-64), 34% (age 65+).
    • Ice Cream: 37% (age 18-34), 19% (age 35-44), 35% (age 45-54), 40% (age 55-64), 38% (age 65+).
  • An FMI survey found that 69% of customers say it is important to have a "good assortment" of private brands for food and beverage products.
  • A "good assortment" of products is less important for home care products (48%), health care products (46%), personal care products (42%), beauty care products (29%), and pet care products (26%).
  • Categories that may benefit most from more variety of private label products based on the percentage of people who haven't purchased private label items because "the specific variety [they] prefer is not available from the store brand are sparkling water/seltzer (38%), ice cream (27%), bacon (26%), and tortilla chips (26%).
  • The top 10 categories that private label brands are mostly or exclusively purchased are the following.
    • Milk (49%)
    • Bottled Water (36%)
    • Bread, Buns, Rolls (32%)
    • Sugar/Sweeteners (32%)
    • Prepared Foods (31%)
    • Canned Vegetables/Fruits (30%)
    • Cheese (27%)
    • Butter/Margarine (26%)
    • Coffee Creamer (25%)
    • Pasta (24%)
  • The top 10 categories that national brands are mostly or exclusively purchased are the following.
    • Toothpaste (85%)
    • Antiperspirant/Deodorant (84%)
    • Shampoo/Conditioner (79%)
    • Facial Skin Care (75%)
    • Candy (Chocolate) (74%)
    • Cat Food (73%)
    • Carbonated Soft Drinks (73%)
    • Dog Food (73%)
    • Laundry Care (73%)
    • Hand and Body Lotion (69%)

Private Label Products and Packaging

  • For 15% of U.S. customers, private label packaging implies lesser quality.
  • This perception is most prevalent among 18-to-34-year-olds at 22%, followed by those who are between the ages of 35 and 44 at 18%.
  • People over age 65 are least likely to equate private label brands will lesser quality at 10%.
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Private Label Grocery Products: Millennials

Millennials in the US demonstrate a general preference for private label grocery products for various reasons outlined below. The aspects of the private label grocery products they like include packaging, price, and healthy ingredients.

Millennials & Private Label Grocery Products

  • Millennials are fueling the growth of private label products in the US by demonstrating the highest adoption. Statistics show that 57% of annual sales at value grocery stores and 23% at premier fresh grocery stores in the U.S. are private label products. Millennials perceive private label products as just another brand, as opposed to a cheap substitute for the real products.
  • Millennials are knowledgeable shoppers who grew up when it was possible to access and purchase anything across the world on the internet. They have learned and experienced diverse cultures, trends, and brands, which has given them greater freedom to develop their own opinions about consumer spending. Thus, they feel that private label brands, like grocery products, offer the best value for money without sacrificing taste, quality, and selection.
  • 62% of millennials observe that purchasing private label brands makes them feel like smart shoppers. They are driven by the convenience offered by private label brands like grocery products, which now offer innovation, quality, and value.
  • Millennials feel that private brands afford them a brick-and-mortar shopping experience combined with convenience, such as buy online/pick-up in store.
  • Private label brands no longer resonate with words like cheap and generic among millennials. Instead, they are seeking transparency, authenticity, and best value in private label brands. About 88% of millennials feel that private label products are equally good.

Aspects Attracting Millennials

  • Millennials like the packaging embraced by private label grocery products. The packaging reflects a departure from the traditional brand ethos and packaging designs of some giant grocery outlets like Kraft-Heinz. The packaging is vibrant and reflective of young shoppers' desire for creativity.
  • Private label brands pack grocery products in packages that are inspirational and fun, as opposed to traditionally old-fashioned and dull. The pack sizes for items such as trash bags are designed for the smaller-space houses of the majority of millennials.
  • Millennials like the value offered by private label brands in the grocery stores. Considering they are faced with different financial challenges compared to the past generations, they are constantly looking for money-saving options. Thus, by buying private label grocery products, they can get the same product for lesser amounts.
  • Grocery stores are able to provide private label products at a lower price since they do not incur product development and marketing costs. The also use innovative packaging, which lowers production cost. Such variables make private label grocery product cheaper, thus endearing them to the millennials.
  • The health conscious millennials are more concerned about their body shapes, mental alertness, and relieving stress. Hence, they like the idea that private label grocery brands such as Good & Gather by Target are offering healthy product. Such organic private label products do not contain artificial flavors, synthetic colors, or sweeteners.
  • Private label grocery brands are positioning themselves to address the healthy eating preference among millennials. For example, heavy-hitters in grocery business such as Kroger, Target, and Albertson are revamping their private-label products. They are emphasizing on plant-based and premium brand offering.