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03/18/2022

Innovation Is Necessary to Counteract Declining Private Label Sales Volume

Consumers are seeking enhancements in meat and dairy alternatives and functional beverages, among other product categories.
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NATIONAL REPORT — Private label sales volume is declining at retail outlets, with innovation being the only solution to combat this trend, according to a recent webinar hosted by the Private Label Manufacturers Association (PLMA). 

Total private brand sales volume dropped by 3 percent in the September 2021 to December 2021 period vs. the prior year, according to data revealed by Kerry during the "Lunch and Learn" webinar hosted by the association. 

Product categories suffering the biggest volume declines during the final four months of 2021 included private label coffee and tea; meals and sides; milk/dairy alternatives; and sauces, condiments and dressings. 

Conversely, private label nutritional/meal replacement beverages, meat and seafood, and meat alternatives stood out as winners during the same period.

To determine how best to innovate, retailers should first look at customer needs, advised presenter Elizabeth Horvath, vice president of marketing for Kerry, a provider of taste and nutrition for the beverage industry.

Kerry classifies private label consumers under two headings:

  • Practical Traditionalists: Often older consumers possessing lower incomes, seeking the best prices, trust, a one-stop shop, and products/brands always in stock; and
  • Adventure Seekers: Often younger consumers with higher incomes, seeking price, flavor variety and nutritional benefits.

"Traditionalists often look at products that reduce negatives, like sodium. Adventure seekers want products that add positives, like protein or probiotics," explained fellow presenter Sarah Miller, strategic market research manager for Kerry. 

Based on the company's research, private label product innovation should be based on what consumers are ready for today. The company gives a "green light" to innovation around meat alternatives, dairy alternatives, nutritional and functional beverages, and sustainability messages and certifications. Progressive and premium private label brands also get a green light as they focus on attributes such as adventurous, creative and fun.

On the flip side, private label meals and sides, bakery snacks and traditional animal proteins receive a "caution" flag from Kerry, meaning innovation can be deemphasized, as they focus on optimization in preparation method, price, quantity and variety. Also getting a caution flag are low-key and value private label brands. 

"Avoid brands associated with basic, price-sensitive and simple," the session noted.

Seniors and retirees continue to buy store brands in droves, but the younger generations are bucking the trend, contributing to a decline in sales, a previous PLMA webinar revealed. 

Nearly $1 out of every $5 spent by seniors and retirees continues to go to store brands. For the 52-week period ended Oct. 3, 2021, 18.9 percent of their total spending went to private brands — an increase of 0.2 percent over the prior year.

Conversely, Generation Z spent 16.2 percent of its overall dollars on store brand products over the same period, a decline of 1.3 percent year over year, while millennials spent 18.3 percent of their dollars on store brands, a 1 percent decline year over year.

The New York-based Private Label Manufacturers Association is a nonprofit organization founded in 1979 to promote the store brands industry. It is the only trade group of its kind, representing 4,500 member companies in more than 75 countries.