Private Label 2019 BEYOND PRICE, CONSUMERS FIND VALUE IN ... · Private Label Behaviors by...

Joan DriggsVice President, Content and Thought Leadership

November 2019

BEYOND PRICE, CONSUMERS FIND VALUE IN PRIVATE BRANDS

Private Label 2019

© 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 2

Private Label Key Trends

Strong tailwind: Virtually everyone is buying them and growth is outpacing manufacturer brands across generations and income groups.

It’s why I shop there: Private brands have a growing influence on store choice.

Room for improvement:Packaging image is a purchase barrier for millennial and Light Buyers. Beverages overall continue to be a challenge for growth.

It feels good: Private brands save money; my family likes them; I can serve to guests; they taste good and they work (efficacy).

It’s about quality: Shoppers have very positive perceptions of private brands relative to manufacturer brands and a high level of trust in their stores’ private brands.

It’s about best value: Shoppers across generations and income groups in 2019 are much more price conscious across categories.


With Recessionary Fears, the CCI Decreased by Almost 3 Points in Q3 2019 From Q2 2019 and Is on Par With Year Ago Sentiment

100.0

97.597.0

99.0 98.6

96.897.3

99.598.7

97.698.2

100.7

90

95

100

105

Q2-2017

Q1-2017

Q1-2016

Q2-2016

Q3-2016

96.4

Q3-2017

Q4-2016

Q4-2017

Q1-2018

Q2-2018

Q3-2018

Q4-2018

97.9

Q1-2019

97.6

Q2-2019

Q3-2019

Consumer Connect Index (Total)


Despite Trade Tensions, Consumers Feel Their Households’ Financial Health Is Better in Q3 2019

51%

51%

57%

51%

My household's financial health is good

My household is making ends meet rather easily

Q3 2019Q3 2018

Consumer Financial HealthTotal Population

Agree With StatementSource: IRI Consumer Connect™, Q3 2018 & Q3 2019


The Struggle to Afford Groceries Eased in Q3 2019 vs. Q3 2018, and Middle and High Income HHs and Seniors are Easily Able to Afford Groceries

70%

71%

69%

70%

67%

Q4 2018

Q3 2019

Q3 2018

Q2 2019

Q1 2019

88%

80%

65%

46%

$35K-$54.9K

> $100K

< $35,000

$55K-$99.9K

77%

63%

65%

74%

86%

Gen X

Gen Z

Millennials

Seniors

Boomers

Inco

me

Gen

erat

ion

Households Easily Afford Needed Groceries% of Households, Total U.S.

Source: IRI Consumer Connect™, Q3 2019


However, Consumers Are Increasing Their Savings to Maintain Financial Stability as a Precaution in the Event of an Economic Downturn

42%

38%

38%

35%

Q3 2017

Q3 2018

Q3 2019

Q3 2016

56%

49%

35%

25%

> $100K

$55K-$99.9K

$35K-$54.9K

< $35,000

52%

41%

38%

44%

44%

Gen Z

Millennials

Gen X

Boomers

Seniors

Inco

me

Gen

erat

ion

Savings Has Grown in Past Six Months% of Households, Total U.S.

Source: IRI Consumer Connect™, Q3 2019


Consumers’ Shifting Attitudes Toward Private Label

Source: https://www.forbes.com/sites/pamdanziger/2019/04/25/four-reasons-why-cpg-brands-are-losing-out-to-retailers-private-labels/#42166b021a2bSource: https://www.fiercehealthcare.com/finance/a-focus-primary-care-clinics-walmart-offering-its-employees-healthcare-workforce-education

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Better value, not just cheaper priceIn a 2019 PLMA survey, two-thirds of consumers agreed with the statement, “In general, store brand products I have bought are just as good, if not better than the national version of the same products.”

Looking at the consumer’s needIt used to be the national brand was the premium offering and the store brand was the generic. But not anymore. Now Whole Foods, Trader Joe’s, and even Walmart offer more premium selections and are leaving national brands behind.

Simplifying the paradox of choiceThe vast selection of consumables in a typical store creates a time-consuming problem for shoppers. Private labels are the go-to solution. Shoppers trust the store, and loyalty to private brands grows as they try additional items. They try, they like, they repeat the purchase.

Loyalty shift from brands to storesRetailers by and large are working overtime to pull shoppers in by offering more services and experiences that shoppers value. This goodwill can translate into more sales of the retailers’ private label products. For example, Albertsons Companies launched the certified plant-based O Organics line of private brand products.


Shopping Behaviorby Generation

Middle and Lower-Income Households and All Generations of Consumers Are Turning to Private Label to Save Money

74%

63%

83%

70%

86%

74%

88%

79%

Try new,lower-priced brands

to save money.

Buy privatelabel productsto save money

$55K-$99.9K> $100K $35K-$54.9K < $35,000

82%

74%

87%

79%

85%

76%

78%

63%

80%

53%

Buy privatelabel productsto save money

Gen XGen Z Boomers SeniorsMillennials

Frequently/Occasionally SummarySource: IRI Consumer Connect™, Q3 2019

Shopping Behaviorby Income

Try new,lower-priced brands

to save money.


99.9% of shoppers buy private brands today,

124M+ HH in YTD 2019

Source: IRI Consumer and Shopper Insights Advantage™, All Outlets, YTD Sept. 8, 2019 vs. YA, NBD aligned


Shoppers Feel Good About Store Brands, Yet Packaging May Be Deterrent to Trial

Statement That Best Describes Your Way of Shopping

5%

11%

19%

19%

41%

53%

60%

6%

11%

15%

18%

45%

60%

65%

Tried store brands but family did not like

Store brands better than national brand

Tried store brands but quality not as good asnational brands

Packaging makes it look of lesser quality thannational brand

Feel good about serving store brand to guests

Feel good about serving store brand to family

Makes me feel good to buy store brandbecause I'm saving money

2019

2016

Source: IRI Consumer Survey


Unit Sales ChangeTotal CPG by Market Sector

Dollar Sales ChangeTotal CPG by Market Sector

However, They Are Growing at Double the Rate of National Brands

Private Label Dollar Sales Decelerated in 2019

Source: IRI Market Advantage™, Year-to-date ending Sept. 08, 2019 and same period prior years; MULOC

1.5% 1.7%

0.3%

4.4%

2.0%1.4%

5.6%

2.2%1.9%

3.8%

1.3%0.8%

2016 20192017 2018

0.4% 0.3%

1.1%

-0.2%

-1.0%

3.5%

0.4%

3.9%

-0.6%

-1.2%

2.3%

-0.4%

2016 2017 2018 2019

Total PrivateLabel

Total CPG Total NationalBrands

Total PrivateLabel

Total CPG Total NationalBrands


Private Label Behaviorsby Generation

Private Label Is One of the Key Drivers of Store Selection, Particularly Among Mid- and Lower-Income and Younger Shoppers

65%

50%

53%

44%

13%

64%

54%

63%

51%

10%

60%

63%

66%

49%

9%

60%

68%

67%

55%

11%

I buy private labeloptions only from

certain stores I trust

I rarely or never purchaseprivate label solutions

I often buy private labelsolutions instead of

name brands

I prefer stores that have alarge variety of private label

products to choose from

I choose to shop at certainstores because of their

private label offerings

$55K-$99.9K> $100K $35K-$54.9K < $35,000

58%

67%

67%

52%

10%

62%

65%

68%

54%

11%

65%

56%

62%

52%

10%

60%

55%

57%

46%

12%

54%

58%

59%

44%

10%

I prefer stores that have alarge variety of private label

products to choose from

I rarely or never purchaseprivate label solutions

I often buy private labelsolutions instead of

name brands

I buy private labeloptions only from

certain stores I trust

I choose to shop at certainstores because of their

private label offerings

Gen Z BoomersMillennials Gen X Seniors

Top 2 Box SummarySource: IRI Consumer Connect™, Q3 2019

Private Label Behaviorsby Income


Traditional GrocerySpecialty Grocery

Club/WarehouseMass

+25 pts+12 pts +14 pts +10 pts

44% 46% 67% 42%

Pts Reflect Absolute Change vs. 2016 Survey Results

Source: IRI Consumer Survey 2019

Store Brands Are Extremely or Very Influential on Store Choice

Private Brands Greatly Influence Which Retailer(s) Consumers Choose to Shop


According to IRI research for “The Power of Private Brands: From the Consumer” report, published in October 2019, adoption of private brands is far outpacing growth of national brands. Retailers have many opportunities to keep the adoption momentum going. For the full report, visit FMI.org.

Private Brands: A Retailer’s Guide to Greater Opportunity

Private Brands Influence Store Visits — 46% of respondents and 54% of millennial respondents report that store brands are extremely or very influential in store choice.

Specialty Grocery Holds the Secret Sauce — More than two-thirds of respondents say private brands are extremely or very influential on store choice in the specialty grocery channel. Trader Joe’s does a remarkable job of promoting a sense of discovery and creating a welcoming, entertaining shopping experience.

Packaging’s Potential — Nearly 20% of respondents report that packaging makes private brands appear to be of lower quality than national brands. While this is a small percentage, retailers should take note, as packaging is a key consumer communication element, and is increasingly being scrutinized for ecological reasons. Packaging presents an opportunity for retailers to shine through with quality graphics, messaging and reuse/recycle/reduce attributes.

Tier It Up — Consumers have demonstrated they are willing to pay more for premium-quality products. Costco, in particular, has formed partnerships that promote both the store brand, Kirkland, and a national brand, such as Nature’s Path Organic and Newman’s Own.

Millennials Do Rule ― And Gen Z Is Right Behind Them — Millennials demonstrate the highest adoption of private label products, increasing 10% in 2019 from 2018, outpacing their adoption of national brands. Millennials are moving into higher spending years, so demonstrating value, quality, and innovation will be key to continued adoption.

Tap the Potential of Older and High-Income Shoppers — As these groups demonstrate increased engagement with private brands, retailers should consider how to further appeal to these shoppers with innovation that speaks to life stage and household makeup, including premium and organic.

Innovation Matters — Retailers shouldn’t wait to follow national brands as they adopt more plant-centric or diet-specific offerings. Albertsons is already winning with the first certified plant-centric line under its O Organics brand. Other trends consumers will be looking for include functionality for wellness, and new ways of connecting with brands, either through technology or greater levels of service.

© 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 15© 2019 Information Resources Inc. (IRI).Confidential and Proprietary.

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Shelley [email protected] President, Public Relations

Joan [email protected] President, Content and Thought Leadership

Private Label 2019 BEYOND PRICE, CONSUMERS FIND VALUE IN ... · Private Label Behaviors by...

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