FMI notes that private labels are growing favorably.
According to new research from FMI, The Food Industry Association, private label offers are still reaping the benefits of higher supermarket costs and greater uptake during the epidemic.
According to the company’s “Power of Private Brands 2023” research, 46% of consumers buy store brand products most or always, whereas over 95% of consumers buy private label products at least occasionally. The use of private labels has grown over the past 12 months as well; 61% of consumers report having bought more store brands this year, compared to just 26% who said they had bought more name brands.
There’s no denying that consumers are happier with private brands, according to FMI. “The feedback suggests that the COVID-19 pandemic-related accelerated private brand trial is having long-lasting positive effects.”
Some customers are also moving away from branded goods as a result of higher retail pricing. Over 50% of consumers said they have noticed increasing food prices in the last few months, and almost 40% of those consumers claimed that as a response, they had started to purchase more store-brand products. When deciding which retailer to shop at, private label items are increasingly becoming more important. Private label options are considered very or extremely significant by over half of consumers (53%) when it comes to where they purchase, a continuous increase from 35% in 2016 and 46% in 2019.
Circana data shows that in the first half of 2023, which concluded on June 25, dollar sales of private labels increased by 8.3%, and dollar share reached a record high of 18%. While unit share increased to a high of 22.5%, unit sales fell by 1.2%. The top three categories for private label sales are natural cheese ($970 million), bottled water ($1.2 billion), up 18%, and fresh eggs ($2.9 billion), up 55% in dollar sales year over year.
According to FMI, a large portion of the growth in private brands can be attributed to inflation and the difficult economic conditions. But there’s more to the gains than just price. Since the epidemic started, consumer testing of private brands has grown significantly, and many consumers have favorable things to say about these brands.
Quality and taste are starting to play a bigger role in customers’ decision to buy private brands, even if they are still largely motivated by reduced costs and better value. The increasing significance of these attributes could indicate that private label items will have more clinging power since consumers believe they are equally as excellent as branded products at supplying sustainable offerings, dependable products, and healthier and better-for-you solutions.
Interestingly, 90% of consumers think they are somewhat or very likely to continue using private labels even if grocery prices drop, and 54% of customers intend to purchase private brands somewhat or considerably more. While 24% of customers say they want to buy less, only 26% of consumers say they expect to buy more name brands.
Over the next twelve months, it is anticipated that several popular areas would experience growth, including packaged breads, frozen foods, canned and packaged foods, milk and non-dairy replacements, and salty snacks.
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Price is still a major factor in purchases, but consumers’ choices regarding private brands are far more complex, according to FMI. The food sector must encourage more private brand testing, win over more consumers to regular private brand purchases, and comprehend how consumers’ perceptions of value are evolving.