- A new report by Cadent Consulting suggests that private label dollar share could reach 25.7% by 2027, growing more than 8.0 percentage points from where it is today, reports Frozen & Refrigerated Buyer magazine.
- Nielsen estimates that last year nearly one in every five items sold in U.S. supermarkets was a store brand. Private brands claimed 18.4% dollar share and 22.3% unit share, and total market size was pegged at $150 billion.
- Industry forces that could drive up private label share include a supermarket sector increasingly emphasizing private labels as a differentiator and margin builder; aggressive expansion by Aldi and Lidl with stores that rely almost exclusively on a private brand assortment; and Amazon’s growing grocery focus, which now includes leveraging Whole Foods 365 label as part of its growth plans.
Grocers across the country are investing a lot of money in their private label lines — and no wonder. The new report by Cadent Consulting now predicts explosive growth in the segment over the coming decade.
What's driving this growth? A lot has been made about the increasing sophistication of private labels in grocery departments. Less talked about is the expansion of store brand options in perimeter departments like bakery, deli, meat and seafood, and prepared foods. As grocers place increasing emphasis on high-growth, high-margin perimeter categories, private labels are following suit as a way to generate higher returns in an industry notorious for operating on razor-thin margins.
The grocery landscape is rife with examples of supermarkets investing in their private label programs. These days, companies like Kroger, HEB, Costco, Lidl and Trader Joe’s offer store brands that are on par with national brands.
Kroger generates more than $20 billion a year from its private label brands. Store brands comprise 25.6% of Kroger’s sales and 28% of units sold. The supermarket chain has grown its Simple Truth natural and organic label into a $1.6 billion brand in just three years. It also recently launched a meal kit line under the name Prep+Pared.
Private label sales are also expected to surge as Aldi and Lidl aggressively expand their footprints nationwide. Exclusive brands dominate these discounters' shelves, comprising about 90% of their selection. Numerous Aldi and Lidl brands have been on the receiving end of awards and other accolades, too.
E-commerce is viewed as another avenue for private label sales growth. This past summer, San Francisco-based startup Brandless began selling a range of 115 generic, environmentally and health-conscious product staples such as toothpaste and organic agave nectar online. Jet.com, which Walmart bought last year for $3 billion, has rapidly grown its assortment under the mega retailer. It recently introduced private brand Uniquely J with edgy packaging and products aimed at urban millennials.
Jet hopes Uniquely J can give it an edge over Amazon, which has slowly grown its own assortment of grocery lines, including Happy Belly and Wickedly Prime. With its Whole Foods buy, though, Amazon now has a storehouse of in-demand private label products to put on its site. Plenty of industry reports circulated about Amazon selling $1.6 million worth of Whole Foods private label products in the first month it assumed ownership of the grocer.
Despite projected growth, it’s probably a stretch to think that U.S. private label penetration will approach levels seen overseas. Nielsen’s latest data in PLMA’s International Private Label Yearbook shows that market share for retailers’ own brands have climbed to record highs across Europe.
In the U.K., private label own a 45% market share in grocery. Meanwhile, six other countries — Germany, Austria, Belgium, Switzerland, Spain and Portugal — boast private label market shares over 40%. In the U.S., it's doubtful that Big Food will sit idly by and watch their sales and share slip away to this extent to private brands.