Striking a balance between pricing and provenance
Kieran Forsey, CEO of private brand grocery specialist Solutions for Retail Brands, explains why "clean and clear" labeling is a key weapon in the battle of the supermarkets.
The price war engulfing the U.S. grocery market has intensified even further over the past year as European retailers continue to grow their market share. Lidl arrived on our shores less than a year ago, with plans to launch 80 more stores on top of the 10 it has already opened. The supermarket is clearly confident its low-pricing model will appeal to customers, and now homegrown retailers are fighting to match it.
Price is always going to be a priority for shoppers — but at what cost? Consumers are increasingly conscious about what goes into their food, and may be prepared to pay more for quality products, whether they are organic, cruelty-free, sustainable or free of ingredients like meat, GMOs, high fructose corn syrup, sugar and gluten.
This sea change is largely down to the powerful millennial market, whose influence stretches beyond the younger generation of shoppers, to their parents and society more generally.
They are well known for sharing their passion for health-boosting and/or ethically-sourced food on social media, prompting retailers to respond with innovative new ranges. The rise of plant-based diets, for instance, has spawned a string of new and exciting vegan lines in major supermarkets like Walmart, Trader Joe’s and Target.
It is striking how quickly private brand retailers have adopted "clean and clear labeling," the name given to organic, sustainable and ethically produced lines. Customers are savvy enough to realize that a picture of wholesome looking fruit or vegetables on the packet is no guarantee a product is free of other less recognizable ingredients. Instead, they want to see "clean’ ingredients," clearly stated.
All this means retailers must pay close attention to the quality and consistency of their lines and not be tempted to cut costs with inferior ingredients. Annual product testing is no longer adequate, not least because some national brands run tests four times a year to ensure high standards are maintained. Having systems in place to listen to customers, whether via reviews, inquiries or social media comments, also helps grocery stores develop and refine their lines, according to the latest trends.
Retailers must also pay close attention to new legislation and societal shifts, and be ready to continually adapt in order to accommodate new market trends and consumer demands. The use of plastics, for example, has been high on the public agenda in recent months with businesses now expected to take their share of responsibility in helping to cut their use wherever possible.
While this could be interpreted as a possible challenge for some retailers, it also provides an opportunity for supermarkets to differentiate themselves from competitors by leading the way on environmental credentials. In the U.K., frozen food retailer Iceland for example, has already been applauded across national and retail media by stating its intentions to eliminate plastic packaging across all its private label products by 2023.
Of course, this announcement will please customers, with the heightened green approach almost guaranteed to deliver a welcome boost to the supermarket’s reputation. It has since revealed it is also to ban palm oil in its range of private label products — a move that has cemented its position as a green leader within the sector.
This all links back to the changing demographic of our target customer base. The average millennial wants to know more about the origins and makeup of a product when compared to the typical older shopper. Any moves by retailers to be more honest about their manufacturing process and relationships with private label suppliers, particularly when there is a strong environmental or quality focus in place, will only be rewarded by positive consumer behavior.
Supermarkets today do not build loyalty on the national brands they stock but on the quality of their premium private brand ranges. A far cry from plain-packaged "budget lines" once seen on the shelves, these products are a key point of difference if retailers demonstrate value for money and reward loyalty.
It’s widely accepted that quality food costs more to produce, so it will be interesting to monitor the success of Whole Foods’ latest move. The upmarket private brand retailer, bought by Amazon, has just launched a loyalty scheme for its Prime customers, with discounts on various premium products each week. They may not be the cheapest on the market, but with discounts, an assurance of quality and the convenience of rapid shipping, it could prove to be an effective strategy.