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Private Label Can be a Stand-Out Category for Observant Grocers

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Private label has become a major category for retailers: 59% of executives say they will continue to prioritize private label, while 21% say their private label efforts will be accelerated, according to a survey by Acosta Group. This has opened opportunities for grocers across the store, though some aisles hold higher potential than others.

“Across the store, the highest shares of private label are in departments like Bakery, Dairy, and Household Care, where private label share ranges from 30% to 40% of sales,” said Colin Stewart, EVP, Business Intelligence at Acosta Group.

“Lower private label shares are in departments like Pet Food, Seafood, and Alcohol, where shares range from low single digits to just below the total store average share. Center store grocery dollar share averages around a 15% dollar share versus total store at 19.5%.”

Despite some areas seeing lower penetration, Stewart noted that the firm has seen share growth happening across nearly all departments. Bakery and Dairy are the highlights in this area, while Baby Care and HBC saw some slight share declines.

Grocers looking to take advantage of the opportunity by expanding their private label offerings should study the subject not just department by department, but category by category.

Chris Kirby, CEO and Founder of Ithaca Hummus, noted that some products have fewer players competing for space, making it more likely that a private label can stand out to shoppers.

“There’s a major advantage in terms of what is available from private label manufacturers today in the hummus category,” said Kirby. “I think you’re seeing the products of the large incumbent brands are basically ubiquitous throughout the private label market, so it’s really easy for a retailer to take that as an opportunity to simply cut out the middleman and offer their customers better value and potentially even better margins for the retailer themselves.”

Trader Joe’s Excels in Private Label

Retailers looking for private label inspiration need go no further than Trader Joe’s, which has managed to keep its prices low and its quality high through its large selection of curated in-house products.

R.J. Hottovy, Head of Analytical Research at Placer.ai, noted that these items in general have outperformed national brands from a visitation standpoint in recent months. This has contributed to the retailer’s store visits being up 6.3% in May 2023 compared to January 2022, when visits to grocery stores as a whole were down 5%. He noted: 

“Trader Joe’s has done a good job innovating around its private label offering.”

“In many ways, their private label products have developed standalone brand equity, much like Costco’s Kirkland Signature products have,” the analyst added. “Trader Joe’s has developed a lot of differentiated private label products — including unique flavors and other products that you don’t often find at traditional grocers — which have helped them to stand out from rivals. Value-oriented retailers are generally outperforming in this environment, but it’s the chains that have really innovated with their value-priced offerings that stand out.”