The branded groceries you actually want
FOR THE MAJORITY of its nondescript life, the humble private label has played the role of poor cousin to more glamorous branded goods. Its packaging was basic, even ugly; the quality, quite good. From cereals to cookies to canned beans, the main appeal of the private label product was its low price.
But private labels, also known as private labels or “own brands”, are shedding their bland reputation and turning from boring to desirable. At Foxtrot, a fast-growing hip convenience store chain, the house bourbon is handpicked by the bartenders at Violet Hour, a Chicago craft cocktail bar, and its potato chips come in flavors like Spicy Dill Pickle. and Himalayan salt and vinegar. Online grocer Thrive Market specializes in well-priced staples like coffee and coconut milk with ethical and eco-friendly pedigrees.
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Meanwhile, Whole Foods Market has rebranded its standard 365 line with a more appealing and whimsical look, and Target, a pioneer of innovative private label, has doubled down on its trendy food products with Good & Gather, a line that includes at both staples and non-items seen elsewhere like Peach Bellini Fruit Spread and Brownie Batter Dessert Hummus.
In short, store brands are no longer the cheap knockoffs you keep tucked away in the back of the cabinet, but quite possibly the tastiest deals on the shelf.
“Exclusive and sexy store brands are a way to attract customers. “
“The way we buy and where we buy is changing,” said Carman Allison, vice president of sales development at research firm NielsenIQ. “Retailers are investing in their private labels as they look for ways to differentiate themselves and meet changing consumer needs.”
Private label has always been big business, and for good reason. These more affordable products actually make more money for stores. Margins on private label food products are on average 10% to 40% higher than national brand sales. Yet it’s only recently that a wide range of grocers have decided to follow in the footsteps of cult grocer Trader Joe, improving packaging and offering products that aim to delight rather than just suffice.
Two trends are fueling change. The first is a quest for customer loyalty. The number of grocery stores in today’s market is dizzying: there are traditional supermarkets, discount stores like Aldi and Lidl, a host of “beneficial” online grocers (Thrive Market among them), and the 800 pound gorilla in this space, Amazon.
Where shoppers used to do one department store a week, the average consumer now goes to three or four different stores to shop, according to Mary Ellen Lynch, director of research firm IRI. Exclusive and sexy store brands are a way to attract customers. “The biggest motivation for us is to have products that no one else has,” said Mike LaVitola, chief executive of Foxtrot, which has stores in Chicago, Dallas and Washington, D.C., and plans to expand. open 50 additional points of sale over the next two years.
Foxtrot products do not imitate national brands but aim to surpass them in quality and design. The line’s ice creams, for example, come in flavor-heavy flavors like Roasted Bananas and Caramel Cinnamon Crumble. Some Foxtrot products, like the seasonal hot chocolate mix developed with Chicago pastry chef Mindy Segal, are collaborations with respected local food artisans that bring premium quality to customers and a halo effect at Foxtrot.
The other products bear no trace of the Foxtrot logo. In partnership with the importer Skurnik Wines & Spirits, the Foxtrot chain has bottled three French wines, including a rosé sold under the Sun Lips label. “You would never know it was our house brand, and that’s the point,” Mr. LaVitola said. Last summer, sales of Sun Lips were twice those of Foxtrot’s second best-selling rosé. The chain reports margins on all private label products 10-15% above outside brands. No wonder Foxtrot store brands now make up around 30% of the store’s overall selection.
Thrive Market also focuses on offering premium store brand products. For its customers, many of whom adhere to special diets such as paleo, keto and gluten-free, that means plenty of own-brand staples. Take Coconut Milk, one of Thrive’s perennial bestsellers. Most brands add thickening guar gum to the product to give it a silky consistency. But paleo followers vehemently oppose the additive. So Thrive made its coconut milk, which sells for slightly less than the leading national brand, without guar gum.
As an online-only grocer, Thrive has also created brands to solve customer delivery challenges. Canned beans, for example, are a popular staple, but they are heavy and therefore carbon-intensive to ship. They also tend to roll around in the box and crush other objects. Thrive’s house brand beans now come in lightweight plastic pouches.
Established grocers are upping their game, too. In addition to its $2 billion Good & Gather brand, Target last spring launched Favorite Day, a line of more than 700 snacks and desserts such as frozen French macarons and cream burned. BoutiqueRite‘s
The Bowl & Basket brand, with its muted color palette and slew of plant-based items, is another contender vying for high-end shoppers.
The rapid evolution of private labels can also be attributed to the pandemic, which has upended established shopping habits. In the spring of 2020, Americans faced a sea of empty shelves; many store brands have tried out of necessity. According to a September 2020 study by management consultancy McKinsey & Company, nearly one in five shoppers said they purchased more private label products during the Covid-19 crisis than before. And 40% of those who have switched to new brands said they are likely to continue buying them after the pandemic is over.
The numbers bear this out. According to NielsenIQ, private label food sales were $123 billion in 2020, up 13.6% from the previous year. And although sales have leveled off in 2021 as supply chains return, Mr Allison (the NielsenIQ analyst) said he expects to see retailers continue to innovate. Premium private labels seem to be here to stay.
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