DENVER, Sept. 16, 2024 (GLOBE NEWSWIRE) -- Private label grocery brands are gaining momentum as changing consumer perceptions and a widening customer base are fueling sales growth and market share gains. Once perceived as inferior to national brands, private label store brands reached an all-time high market share in dollar and unit sales during the first half of 2024 as quality perceptions have improved. Growing acceptance among younger and higher-income consumers is also propelling category growth.
Higher food prices and the inflationary environment over the last two years prompted more consumers to try private label products, given their lower prices and association with value. However, recent research shows consumers are increasingly citing quality, taste and variety as key drivers influencing their repeat purchases.
According to a new report from CoBank’s Knowledge Exchange, grocery retailers are seizing on the growing popularity of private label products, which typically generate higher profit margins than national brands. The report suggests retailers will accelerate efforts to expand their private label offerings, targeting growth segments such as bakery, seafood and beverages.
“Quality perceptions of private label foods have improved considerably since the last surge in usage, which was around the 2008 recession,” said Billy Roberts, food and beverage economist for CoBank. “Private label brands may be less expensive than national brands, but for consumers the notion that they’re trading down or compromising on quality is subsiding. That suggests these brands have greater long-term staying power and grocery retailers will look to capitalize on the opportunity for attractive margins.”
Dollar sales of private label products in the U.S. have grown more than a third since 2019 and are projected to surpass $250 billion in 2024, representing roughly 20% of grocery basket share according to data from Nielsen. Aldi and Trader Joe's lead large U.S. retailers in private label purchase share, with 80% and 69%, respectively, but private label options account for more than a quarter of grocery sales at Costco, Sam's Club, H-E-B and Walmart.
Recent survey data from the Private Label Manufacturers Association shows most consumers now believe private label products are equivalent to name brand products. That assessment was consistent across a wide swath of income and generational demographics. Even more telling, only 2% of consumers regard private label food and beverage products as inferior to name brands in quality.
Private label’s largest penetration has traditionally been in categories where branding or innovation is less of a priority for consumers, particularly in perimeter areas of the grocery store such as produce, animal proteins, eggs and dairy. However, a host of new private label offerings from national retailers suggest name brands could face increasing competition in center-of-store categories.
Roberts says national brands will likely turn their attention to battling private label offerings, especially considering their broad acceptance among GenZ and higher-income consumers.
“Innovation has traditionally been a key to regaining lost share for name brands and it’s clear consumer packaged goods companies are moving in that direction,” said Roberts. “ConAgra, Hershey and others have recently announced initiatives to increase their innovative launches, principally to regain lost share and fend off further incursion by private label offerings.”
Read the report, Private Label Consumers Came for Price, Stayed for Quality.
About CoBank
CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 77,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
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