Store Brands: Plentiful Opportunities for Grocers

While retail sales rose in March, rising gas prices and commodity costs have been concerning shoppers for several quarters and are factoring into daily shopping decisions. With food costs slowly increasing, private label products are again at the forefront of grocer’s strategies.

The current mood of the economy undoubtedly changes many shopping habits, but some are more stable and consistent over time. One sector that tends to see more stable shopping habits is grocery. The foods and brands we purchase for our families is typically more consistent than what type of shoes we buy or whether we use our tax refund check to splurge on something special. Although we know shoppers tend to be especially brand loyal in the grocery aisle, the tides may be turning as private labels prove to be valid substitutes for name brand products.

According to a recent Nielsen survey, 60 percent of consumers said they bought more store brands during the downturn, and more than 90 percent of those say they will continue buying store brands. Retailers are banking on the fact that many shoppers will continue to prefer the store brand even when the economy turns around, and many have moved to ramp up their investment in this area.

While private labels have made inroads with many shoppers, there are still categories that do not seem to have made as strong of a connection. A recent study by Market Force Information found that private label milk is considerably more popular than private label cereal. Taste and brand recognition seem to be the primary distinguishing factors, but the study found that the distinction between private-label and named brands is fading for consumers, and more shoppers may not even know that certain brands are private label. The example goes a long way to show shoppers’ willingness to change, but also reinforces that brand loyalty remains an impediment to store brand growth in some categories.

What’s your outlook for private label awareness and adoption?