Private Label’s Rise to Deli Premium

Retailers are using quality, private label deli products to differentiate their stores.

A private label brand used to mean one thing to shoppers: cheaper than the name brand, not what they really wanted, but chosen for the savings. In general, that has changed, especially in the deli department. Today’s private label programs are built on quality, local relevance and a retailer’s own reputation.

“Leaning toward quality has changed the most,” says Chris Darling, chief commercial officer of Mama’s Creations, a food manufacturer headquartered in East Rutherford, NJ. He has watched the category evolve from both sides of the counter, first as a retailer and now on the manufacturing side.

“A lot of our questions, when we collaborate with retailers, are about the quality components versus just the less expensive option,” he says. “In earlier days, the question was, how do we get this as low a price point on the shelf as we possibly can. Today, I think the retailers are thinking about private label a little bit differently than that.”

WHAT’S SELLING AND WHY

At Mama’s Creations, center-of-the-plate protein items are driving demand. There is lots of interest in chicken and the company’s well-known meatballs. “We get questioned all the time around the protein per serving being a big hurdle for a lot of retailers,” says Darling. “Some of them are looking for a specific number that they’re going to be able to speak to the customer about and show off.”

Bob Sewall, executive vice president for sales and marketing of Blount Fine Foods, food manufacturer based in Fall River, MA, sees a similar pattern in soup, a category he says generates more than $1.4 billion in private label retail sales. He cites internal data showing GLP-1 patients buy 18% more soup while on the medication, and 42% more once they stop.

“It’s liquid, preservative-free, high protein, so it becomes a great maintenance way for them to get nutrition in one easy application,” he says. Blount is now adding protein callouts to packaging across its private label, Panera Bread- and Blount-branded soups, alongside dairy-free, gluten-free and vegan formulations.

For Gonnella Baking Co., a family-owned baking company founded in Chicago, IL, bread is still king.

“Sub rolls and French rolls continue to be the foundation of many made-to-order and grab-and-go sandwich programs because they deliver the consistency, quality, and performance retailers depend on every day,” says Dave Gonnella, vice president of sales. “Bolillo and telera rolls are also gaining momentum as retailers expand Hispanic-inspired sandwich and prepared-food offerings. These products provide authentic flavor and texture while supporting a wide range of sandwiches and meal applications.”

Darren Jones, director of private brands for Reser’s Fine Foods, a food manufacturer based in Beaverton, OR, points to meal programs in general. “Customers are increasingly making last-minute decisions and looking for dinner shortcuts,” he says, adding that competition from online meal delivery services has pushed retailers to enhance grab-and-go solutions.

HOW PRIVATE LABEL PRODUCTS DIFFER

According to various manufacturers, what separates a strong private label item from a weak one, comes down to whether it’s built to compete on quality or simply to hit a price point. Retailers who lead with core items at the right size and price, which can be consistently delivered, are the ones gaining share.

“Consumers are looking for private brands they can trust,” says Jones.

Gonnella notes that quality expectations for private-label bread and rolls have risen, with buyers now expecting store brands to be the same level of quality as national names. When retailers approach Gonnella about a private-label program, the conversation typically starts with what will make their store different from the one down the street.

“Retailers now use private label to establish their own identity, differentiate their deli assortment, and create products that shoppers cannot purchase from a competing store,” he says.

“Retailers now use private label to establish their own identity, differentiate their deli assortment, and create products that shoppers cannot purchase from a competing store.”

— Dave Gonnella, Gonnella Baking Co., Schaumburg, IL

Labor costs are a bigger piece of the conversation than they used to be, says Gonnella. “Retailers are looking for products and formats that simplify store execution without sacrificing freshness or appearance,” he says. “That has increased interest in thaw-and-serve breads and rolls, as well as flexible frozen dough programs.”

Frozen dough, for instance, provides labor savings and a lot of options. “A deli can use one base dough and create several varieties by adding seeds, cheese, herbs, or a Dutch Crunch topping,” says Gonnella. “This gives the department more variety without requiring a separate SKU for every finished item.”

Regional customization matters too. At Blount, soup recipes are tailored to what is popular in the region. Consumers in Chicago favor chili-forward flavors. In Wisconsin, it’s beer cheese, while Hispanic-style recipes are popular in the Southwest, but always with quality in mind.

“You want to have a great-tasting, quality soup,” says Sewall. “Quality wins out. You can have a low price, but if the customer doesn’t like it, they’re not going to spend their hard-earned money on something they don’t enjoy.”

THE CASE FOR PRIVATE LABEL

Manufacturers agree that it makes sense to take up premium deli space with private label products when those products fill a gap national brands can’t. That could be a regional flavor your customers want, a specific dietary need or a retailer’s own foodservice reputation.

“When filling in niche areas, regional flavors — things that might be really important from a local standpoint — are a great place for a deli to go private label,” says Darling, since a branded product typically can’t offer regional substitutions.

He adds that most retailers are using their private label lines to build credibility with shoppers who are choosing between the deli and a nearby restaurant. “The consumer is really looking for a quality solution that gets them close to a restaurant experience, and retailers doing that are definitely winning in the space.”

Reser’s frames the case in terms of loyalty and control. “Private brands help grocery delis distinguish themselves in the marketplace,” says Jones. “They’re a strategic way to build loyalty by delivering the quality and taste that shoppers can trust when they’re making real-time meal decisions. This can lead to increased traffic flow, stronger consumer loyalty, and improved control over sales and profitability.”

Gonnella cites figures showing that more than 80% of consumers now rate private label quality as equal to or better than national brands, and more than 90% say they intend to keep buying store brands regardless of pricing shifts elsewhere in the store, evidence, he says, that loyalty is increasingly earned through quality rather than discount.

MARKETING AND MERCHANDISING THAT WORKS

Every manufacturer favored the same underlying strategy: connect the private label item to a complete meal, rather than merchandising it as a stand-alone purchase.

“I think grouping is the strongest strategy,” says Darling, comparing a well-organized deli case to a restaurant menu. “Here are my appetizers, here are my main courses, here are my desserts, it’s all grouped. I think retailers that do that with their private label products in the deli get a lot of credibility that way as being a food destination.”

Sewall recommends pairing soup with salad and sandwich combinations that already exist within most delis, or offering the private-label line in a different pack size than the national brand so the per-ounce value stands out.

Gonnella suggests anchoring bread and rolls to a protein or hot-bar item — rotisserie chicken, sliced meats, soup — and building bundled promotions to encourage cross-merchandising throughout the store.

Packaging plays a defining role in whether shoppers trust what they’re buying. “We all shop with our eyes first,” Darling says. Because private label carries a legacy perception of being a lesser option, he says, “competing on appearance is critical because you don’t want to reinforce any old notions right off the bat.”

Gonnella echoes that packaging is often a shopper’s first interaction with the product, and needs to communicate freshness and the retailer’s own brand story, along with holding the item.

BENEFITS AND CHALLENGES

Jones is the most direct about when private label doesn’t make sense. “Labor constraints can lead to inconsistency and execution issues,” he says. “In those cases, leaning toward consumer-packaged goods and less labor-intensive solutions might be the right move for a deli.”

Reser’s works with retailers to find the right mix based on staffing realities and local market conditions. “We believe it’s critical for deli operators to have a strong grasp of their brand identity and what they have to offer consumers, whether it’s premium quality, affordability, or another distinguishing attribute,” says Jones. “Once that’s clear, we help identify formulas, product variety, sizes and packaging that best serves their shoppers.”

Manufacturers face their own hurdles, too. Retailers keep adding new rules about what ingredients and packaging they’ll allow, so companies like Gonnella have to get creative to meet those rules while still making a good product.

And it takes time — a new item usually takes four to 12 weeks to develop at Reser’s, and even longer for a bakery product at Gonnella, which has to go through test batches, larger production runs, and often in-store trials before it’s ready to sell.

Darling adds that private label in the deli behaves differently from the rest of the store. “In other areas of the store, it becomes a very branded thing,” he says, citing large retailers with well-known store brands. In the deli, by contrast, “it’s less of that. Private label becomes a scale label, or it’s simply the feel that this was made by the people in the store.”

In other words, the store’s own name and reputation carry the weight that packaging and branding usually would, which means quality and consistency matter even more.

So, is private label right for every deli? Not automatically. It depends on staffing, regional identity, and whether a retailer is prepared to invest in quality that customers will want to buy repeatedly, rather than simply chase a lower price point. But for delis willing to make that investment, the opportunity is clearly growing.

“Retailers who don’t currently have a strong private brand strategy in the deli will be missing out on a significant growth opportunity that not only drives sales but builds customer loyalty.”

— Darren Jones, Reser’s Fine Foods, Beaverton, OR

As Jones puts it, “Retailers who don’t currently have a strong private brand strategy in the deli will be missing out on a significant growth opportunity that not only drives sales but builds customer loyalty.”