Basket Rings Still Include Private Label Products as Economy Strengthens
CHICAGO — Signs point to a healthy and strengthening economy; however, consumers continue to purchase private label products as nearly one in three U.S. households struggled to afford groceries in the third quarter.
According to IRI's Consumer Connect survey, that number is in line with the same period last year, but up from 28 percent in the first quarter of 2016.
The IRI survey also revealed that younger and less-wealthy shoppers are struggling more than other shoppers. Specifically, 59 percent of consumers from households earning less than $35,000 per year and 36 percent of millennials are having difficulty affording groceries. As a result, 89 percent of these lower-earning shoppers and 90 percent of millennials are buying private label brands to save money.
In addition, 81 percent and 83 percent, respectively, will try lower-priced brands to save money compared with 73 percent of all consumers.
"It is no secret that consumers are interested in [consumer packaged goods] products that address their wants and needs," said Susan Viamari, vice president of Thought Leadership for IRI. "When you look at the uncertainty and financial hardships that many consumers are facing and couple it with their favorable attitudes about the value and quality of private label products, it all adds up to a positive outlook for private label success.
"In fact, value is playing a huge role in the 'want equation,' and consumers will buy different brands, including private label solutions, to get the value that they want," she added.
According to the survey, seven out of 10 millennials prefer stores that have a wide selection of private label products, and nearly as many (66 percent) often buy private label options over name brands.
The appeal isn't limited to younger shoppers: Consumers from all generations view private label as a way to save money and improve value without sacrificing quality. According to IRI, consumers said:
- They buy private label brands to save money: 90 percent of millennials, 87 percent of Generation X, 81 percent of baby boomers, and 81 percent of seniors.
- Private label products are just as good in quality as national brands: 83 percent of millennials, 79 percent of Generation X, 72 percent of baby boomers, and 71 percent of seniors.
- Private label products are a better value than national brands: 75 percent of millennials, 71 percent of Generation X, 65 percent of baby boomers, and 64 percent of seniors.
Though private label sales are healthy overall, the grocery channel has seen momentum slide during the past few years, IRI found. Within the grocery channel, private label dollar sales have fallen 1.6 percent in 2017 after dropping 3.2 percent in 2016. National brands, by comparison, inched up 0.3 percent and 1.6 percent, respectively, during the same period.
IRI's research shows that the future is bright for private label solutions. Two-thirds of consumers plan to purchase private label more frequently in the coming six months. Among millennials and lower-earning shoppers, three-quarters expect to buy more private label solutions during that timeframe.
But the market is transforming quickly, as assortment becomes broader and more targeted and new players enter the marketplace, according to IRI. For example, Costco is focused on driving private label penetration from the current rate of about 25 percent of sales to 37 percent of sales.
In addition, by 2022, major private label players Aldi and Lidl could have a combined 10 percent of grocery share.
"The transforming marketplace certainly warrants close monitoring," Viamari said. "As the players in the game change, existing players will continue to evolve their private label strategies to protect and grow share. Private label is anyone's game to win, and the winners will be those that stay in lockstep with the rapidly evolving needs, wants and behaviors of today's CPG shoppers."