Over 90% of grocers are planning on either moderately or significantly increasing their investment in private-label brands over the next two years, according to a report from FMI — The Food Industry Association.
That’s an increase from 82% who felt the same waya year ago as grocers continue to reap the benefits of more and more shoppers turning to private brands.
FMI’s report, “The Power of Private Brands 2024: Industry Strategies to Sustain Momentum,” was based on an exclusive survey of 42 food industry executives.
“The private-brands industry is thriving, and it’s clear why: Its value is often unmatched,” FMI Vice President of Industry Relations Doug Baker said during a press briefing on the report. “The sector has become a critical area of growth and investment for both retailers and manufacturers.”
Sales of private-label products reached record-high market shares in both units and dollars in the first half of 2024, according to Circana data.
Unit market share for private labels climbed to 22.9% of the total unit volume, and dollar market share grew to 20.4% of total sales as of June 16.
To meet the increasing demand for private label, executives are investing substantially in developing new products and appealing to a broader customer demographic, especially younger shoppers, Baker noted.
Grocers are also strengthening their supplier and trade partnerships to drive innovation and sustain the ongoing momentum of private brands in food retail, Baker said.
Key areas of investment include adding capacity and value through innovation and new product development in growth opportunities like premium, best value, health and well-being; products with simple/clean ingredients; and frozen and fresh foods, according to the report.
Price (71%) and good value (72%) are the top reasons cited by shoppers for buying more private-brand items, according to FMI’s consumer research, and 80% of food industry respondents believe that private brands continue to perform well in terms of driving growth of customer purchases via delivering value.
More than half of grocery retailers surveyed, however, want to focus on emphasizing the value of private brands beyond price, according to the new report, focusing on other areas that motivate consumers’ private-brand purchases, including quality, taste, and meeting meal solution needs.
Younger consumers are also a target for grocers when it comes to private label. Eighty-one percent of food industry executives said that appealing to younger consumers is a top priority, along with emphasizing value/price, to driving private brand growth, the report said.
In order to attract younger shoppers, food retailers (69%) and manufacturers (52%) said digital marketing was the top strategy, along with increased use of samples, leveraging shopper insights, boosting convenience, and enhancing ecommerce experiences through search functionality, suggestive selling, and more compelling online product images.
