- Ahold Delhaize, the Netherlands-based grocery retail group, set a goal to have 50% of its private brand sales coming from nutritious products by 2020. In 2017, the company reached 46%, according to Store Brands.
- Already there has been a 50% reduction of sugar in private brand organic fruit punch and lemonade beverages, which are part of Ahold Delhaize USA's Nature’s Promise line. Sugar was reduced by 80% in English muffins, and salt was reduced by up to 35% in items like hoagie buns and potato rolls. In addition, high fructose corn syrup was reduced by more than 80% in more than 70 bakery items. Consumers testing the products did not notice the changes.
- “Good is not enough,” said Jac Ross, vice president of private brands innovation for Retail Business Services. “Good is the enemy of great. Because if somebody settles on [a product] being just good enough, that suggests there is something after that."
In a market where brand loyalty is low and getting lower, supermarkets have found that they can make higher margins while charging shoppers less, but grocers like Ahold Delhaize have poured money into private label development. Unlike other grocers who focus on value or trendy ingredients, for Ahold Delhaize, the key to success is to focus on health and the free-from trend that is sweeping the industry.
To do this, Ahold Delhaize is searching how to reformulate their foods into more “nutritious products.” According to their 2017 annual report, this translates to a reduction in sugar, salt and saturated fat. One of their subsidiaries, Albert Heijn, is already reformulating store-branded products, and the brand has cut sugar consumption by reducing the sugar content in all of its fresh fruit drinks by as much as 30%. In the grocers’ U.S. brands, nearly half a million kilograms of sugar were removed from products in 2017. The report also notes that “in response to consumer demand, we are also increasing our organic range and offering more products that do not contain artificial ingredients.”
Many of the products that have been reformulated are the low-hanging fruit — fruit drinks and commercial baked goods where there is often an excess of sugar. Their next round of creating “nutritious products” may need them to get a little more creative as they work to satisfy taste buds and implement nutritionally valuable changes. We might see them altering yogurts, premade meals, or in-store dessert offerings where one often finds a surplus of the ingredients the company is looking to minimize.
But why focus on their in-store brands exclusively and not weed out the unhealthy products that are stocked throughout the store?
Private labels have become particularly attractive because of the value that they provide consumers, both nutritionally and financially. Many private label brands also use the same high-quality ingredients and manufacturing lines as their national counterparts, but IRI estimated at the end of 2016 that shoppers could save $44 billion per year by choosing private label products over national brands.
Consumers have noticed: Store brands now make up 17% of all grocery sales, according to the Private Label Manufacturers Association, and could grow market share by as much as 10% over the next decade. A recent survey from retail services company Daymon found that 81% of shoppers buy private brands on virtually every shopping trip, and 85% say they trust private brands as much as national ones.
Now, due to their success, private labels are under pressure to stand out from one another. To do so, retailers like Albertsons — whose line Albertsons’ O Organics recently hit $1 billion in annual sales — and Ahold Delhaize — whose Nature’s Promise brand, a line of USDA-certified organic and free-from products is positioned to exceed $1 billion in annual sales — have begun to fortify their private label grocery offerings.
Private labels are slowly gaining a reputation for being an experimental ground for trendy ingredients or attractive packaging. However, there are risks to this strategy. A failed private label product means losing out on the profits that branded counterparts could have brought and the shelf space they could have occupied. Ahold Delhaize will have to ensure their reformulations are innovative to avoid this fate.