Private label food items are becoming increasingly popular as consumers look more for value in their choices and perceptions of private label's quality improves. Store brands accounted for nearly $3 billion in incremental sales overall at the end of 2014, an increase of 2.5% over the previous year and more than twice the percentage gain that was recorded by national brands, according to the Private Label Manufacturers Association's 2015 Private Label Yearbook. Store brand sales at U.S. supermarkets specifically brought a $1.1 billion dollar increase in annual revenues in 2014 for the sector.
One supermarket in particular has seen growing success of its private label brands. The Kroger Co.'s same-store sales of natural foods were up by 10% in its last quarter, attributed to the growing popularity of its private label Simple Truth line. Sales from the brand hit $1.2 billion in 2014, which is still only a small percentage of the chain's overall 2014 revenue of $108.5 billion, but the brand is quickly becoming more popular as a lower price alternative to competing organic products.
The company also plans to launch a new private label line called HemisFares, which consists of international foods imported directly to Kroger stores. The line is an attempt to appeal to Millennials and foodies who are looking for unique products, but are still keeping price in mind. CEO Rodney McMullen says consumers are no longer just interested in price, they are also looking for quality. Of the new line, McMullen said:
If you look at the quality of this product, if you would go to a restaurant and eat food – eat something of this quality, it would cost four or five times as much as what it costs with us. So customers get to experience something that's very unique that's outstanding quality. And it's really the team searching across the world finding items that are very, very unique and very regionally based.
The line will be available in almost all Kroger stores, but McMullen noted some of the product availability will be limited because production can't be easily increased if there is a high demand for a specific product. Some of the possible types of products are pasta, olive oil and balsamic vinaigrette. The brand will be launched at the end of September.