Dive Brief:
- Store brand sales grew almost 10% in 2017 in mass merchandisers, club and dollar stores, according to a new report by Nielsen.
- Dollar sales of private label in the mass channel were up 9.3%, with unit sales rising 9.1%. In contrast, national brands slipped 0.3% in dollar volume and a full 1.0% in unit volume.
- Research also showed that mass channel was closer than ever to overtaking traditional supermarkets as the place where consumers do their grocery shopping. Total sales in the mass channel hit $305 billion, compared to $324 billion in supermarkets.
Dive Insight:
Consumers want more private label options, and are turning to mass merchandisers, like Walmart, club stores and dollar stores to meet their needs.
Store brands aren’t just attracting shoppers in-store, spurring them to pick up a private label ketchup as opposed to the Heinz. They’re also motivating consumers' decisions on where they shop in the first place. Fifty-three percent of shoppers used store brands to determine where they shop now, versus 34% in 2011, according to Acosta, a sales and marketing company.
Out of the $305 billion in total sales for mass channel in 2017, an impressive $54.9 billion came from store brands. That’s up almost $5 billion from 2016.
Eager to keep the growth going, many mass merchandisers are investing in expanding their private label offerings. This past fall, Walmart introduced a new line called ‘Italia,’ under its Sam’s Choice store label. It includes 40 items, ranging from sauces and pastas to salad dressings and boxed dinners.
Costco has a long, successful history with its store brand, Kirkland Signature. The private label generates about a quarter of the wholesaler's $118.7 billion in annual sales, a percentage company executives expect to grow.
While not new or novel, the Kirkland Signature-branded liquors boosted the club store's alcohol sales to $3.8 billion in 2016, with wine sales making up almost half of the total. The category has surged 46% in the past five years, blowing past the company's broader food offerings.
Costco and Walmart are both smart to offer more private label options to appeal to consumers, and also boost their negotiating power with national brands. Both retailers are known for pressuring suppliers to lower the price on national brands to stay competitive, especially in the face of their own, often cheaper, store brand alternative.
Looking ahead, Walmart plans to source all of its private label coffee sustainably by 2020. This is likely a move to appeal to millennial consumers, who are less loyal to national brands than their parents. They do, however, care more about sourcing and how a product impacts the environment.
In many ways, the mass channel is mirroring that of its supermarket competitors when it comes to store brands. Private label makes up 17% of grocery sales, according to the Private Label Manufacturers Association, and is only expected to grow.
Kroger, which has seen its store brand sales shoot up 37% since 2011, says it plans to continue investing in brands like Simple Truth as part of its Restock Kroger growth initiative. Discounters Aldi and Lidl stock predominantly store brands, including numerous award-winning items.
Each retailer is using store brands as a way to stand out to consumers. By shaking off the ‘generic’ image, private labels are a way for a store to differentiate itself, while appealing to consumers’ pocketbooks at the same time.