• by Steve Ellwanger , April 23, 2021

By now, it’s a familiar story in the CPG space: The pandemic generated new trial users for food and beverage brands, fueled by pantry loading and resultant out-of-stocks across many categories.

Private-label products also benefited—in part because consumers’ financial uncertainty made some of them more price-conscious.

Data from Nielsen show that in CPG categories like dairy, deli and frozen foods, national and private-label brands were pretty much in lockstep in their 2020 dollar-sales gains.

Two notable exceptions were seen in frozen foods and seafood. In frozen, private label grew by 24.8%, while national brands rose 19.8%. National seafood brands climbed 25.6%, compared to 15.5% for store brands.

Meanwhile, in bakery aisles, national brands declined by 3%, and store brands by 0.5%.

One explanation is that consumers were reluctant to shop high-touch areas of brick-and-mortar stores like bakery because they perceived a heightened risk of infection, according to Shelley Balanko, senior vice president at research firm The Hartman Group.

Last summer, Hartman fielded a survey of 2,008 people ages 18-74 about food sourcing. Among the findings: 22% of shoppers said they had become more reliant on private-label products compared to pre-pandemic times. Among that group, 52% indicated they would continue to rely more on private label once COVID-19 was no longer a major concern.

In this interview, which is edited for brevity and clarity, Balanko talks about private-label brands pricing, what constitutes “premium” offerings, and generational preferences.

CPG FYI: How do things like price and quality resonate with consumers when it comes to private-label offerings?

Balanko: When it comes to engaging with private brands, price is the table stakes. It’s got to be equal or lower than the name brand in that category to even enter the consideration set.

Quality has become the clincher—things like ingredients, taste, texture and nutrition. When that appears to be equal or better than name brands, that’s when consumers will absolutely engage.

CPG FYI: How does the term “premium” fit in?

Balanko: What we’ve heard consumers talk about in recent years is that private brands have been innovating around premium attributes—and that becomes the differentiator. That’s what cultivates trust and loyalty, and a lot of positive regard gets transferred to the retailer.

Premium attributes are things like organic certification, packaging that’s a little more on-trend, more authentic flavors or culinary traditions behind the product, and interesting narratives around ingredient sourcing or production practices.

CPG FYI: What did you learn about specific retailers’ private-label offerings from last year’s survey?

Balanko: Costco, Trader Joe’s and Whole Foods get high marks. Among past-30-day shoppers of those stores, 49% said Trader Joe’s has a good selection of its own brands, 44% for Costco and 37% for Whole Foods Market.

CPG FYI: Why is that?

Balanko: When you look at their product lines, you’ve got some really interesting products. For example, Costo’s Kirkland Signature olive oil has been endorsed by a star chef. And when you think about being trend-forward as far as health and sustainability, Whole Foods’ organic, virgin coconut oil is very compelling at a nice price point.

CPG FYI: When you look at the magnitude of private-label offerings at some grocers, it seems like people have fewer choices than ever because of how they dominate shelf space.

Balanko: The retailer controls the real estate, and some of the prime real estate has been going to their private brands. They can create very powerful brand blocks that capture the consumer’s eye and attention. In a survey we’re about to field, we’re going to ask the consumer the extent to which they find that helpful or off-putting—to be in a retail environment where private brands are so dominant in terms of their share of shelf. Some could feel there’s a lack of choice, while for others it could be “great, that’s exactly why I shop here.”

CPG FYI: Baby Boomers don’t exactly lead the pack when it comes to purchasing store brands.

Balanko: What’s interesting about the younger generational cohorts and their interest in private brands is that they are always seeking novelty. If you think about the array of choices that boomers—and even Gen Xers—had growing up, it was constrained across categories compared to what millennials and Gen Z have grown up with. They’ve had so much choice in pretty much every single category that they’re always used to buying something new. They’re just culturally primed for seeking out novelty.