With inflation at an all-time high, there is no better time for delis to double down on private label products.
Providing a lower cost and comparable quality to branded items, consumers are discovering the benefits of private label alternatives.
According to Statista, a Tulsa, OK-based market research firm, in 2021, the retail market share of private label brands in the United States was 17.7%, down from 19.5% in the previous year. In that year, retail sales of consumer packaged goods sold under private labels in the United States amounted to around $199 billion,
up from $197 billion recorded the previous year. With $40.4 billion, refrigerated products were the most purchased items in the private label market segment in 2021. General food and general merchandise followed in the ranking with $33.8 and $25.2 billion, respectively.
Because private label purchases typically occur more often on site than online, according to Statista, there is more opportunity for stores to promote these items at point of purchase. Statista reports that some retailers, such as Aldi, make private label brands the main source of sales and thus consider these vital in daily operations. Refrigerated products and general foods were the best-selling private label categories in supermarkets, while tobacco and liquor were the least purchased. When looking at the change in dollar sales between 2019 and 2021, edible private brands grew more than non-edible ones.
Changing buying habits due to the coronavirus pandemic, economic factors as well as improvements in product quality and variety have contributed to changes in consumers attitudes toward private label brands, Statista reports. As shown by a recent survey, consumers have come to realize that, in terms of quality and value, these products are often as good, if not better, than the national brands they used to purchase and the main reason they switched to a private label brand. The recent rise in inflation has also been a major factor that has prompted consumers to cut back on name brands and instead purchase private label products on a long list of products, particularly pantry items. The purchase of private brands has been quite similar across generations and income levels, indicating this as a general consumer trend.
As the industry headed into 2022, sales of private label products picked up right where they left off at the end of last year, growing 4.2% in dollar volume across all U.S. retailing channels in January, compared to the same period in 2021. The increase was about equal to the 4.4% growth of national brands, according to IRI data provided to the Private Label Manufacturers Association (PLMA), located in New York City.
“In the deli, it’s the time of year where people tend to add their fall flavors, like spiced pumpkin and butternut squash,” says Bob Sewall, vice president of marketing, Blount Fine Foods, Fall River, MA. “The majority of customers have private label in our Panera national brand program, and we can augment flavors around both lines to help the category.”
Blount’s private label program offers the Clam Shack line of seafood soups, Panera Bread and Blount Family Kitchen soups and chilis.
“Many customers have a giant wall of soup with Panera, Blount Family Kitchen and Clam Shack,” Sewall says. “The soup business is very healthy, as this is a comforting food during tough inflationary times. Soup is filling, and you can build a simple meal around it. It’s also cost effective.”
Although there have not been any recent packaging innovations, it is easy to bring added attention to private label soups.
“Having a soup of the month to feature with a flavor that complements the time of year or holiday [is effective],” Sewall says. “Also, delis can offer soups in private label packaging that is from the hot bar.”
More and More retailers are entering into the private label segment for this category of product.
“In the past, the segment was marginal,” says Simone Bocchini, president, Fratelli Berreta USA, Mt. Olive, NJ. “Today, the category is showing a very healthy growth and more and more attention is paid to it.”
The company has been a master salumiere since 1812, offering all-natural prosciutto, salami, coppa and pancetta.
“The combination of historic inflation rates, supply chain challenges, and increased trust towards private label brands have created a significant increase in private label requests as we exit the pandemic,” says Jim Viti, vice president, marketing product development, DeIorio’s Foods Inc., Utica, NY. “Additionally, the past two years have laid groundwork for increased meals at home in various stages of preparation. This is one of the historical strong points for the deli area.”
DeIorio’s Foods specializes in doughballs, pizza crusts and more recently the adaptation of pizza kits that include cheese and sauce for added convenience. These products come in classic white and wheat varieties but have since expanded towards veggie inclusions such as cauliflower and broccoli as well as specialty varieties such as hemp and chick pea.
Customers are attracted to limited time offers and specials, which are a good fit for private label items.
“This is a great way to introduce a new flavor,” Sewall says. “Signage can be simple; it doesn’t have to get complicated.”
Offering butternut squash soup at Thanksgiving time and lobster bisque for winter holidays, for example, draw attention to the category.
“There is no reason private label shouldn’t grow if the quality is good,” Sewall says. “What makes this section interesting is you’re able to mix and match national brands with private label brands. There may be a certain cheese your supermarket is known for or some way to manufacture private label soup conducive to your shopper and region. We try to give our customers private label soups that make sense for their customer base.”
Retailers have developed private label programs in other part of the store for years, and they have created a reputation with their customers in terms of strict suppliers’ selection and product evaluation, Bocchini says, adding, “I believe that leveraging on that ‘confidence’ from the consumer in the deli department can attract even more customers to try new items.”
Private label packaging also has seen a transformation like with branded items. For example, Fratelli Beretta has been working with several packaging materials suppliers in order to reduce its plastic usage, carboard usage as well as improve the recyclable level of the material.
“Sustainability and flexibility are front and center, while consumer convenience and portioning are also significant drivers,” Viti says. “Private label may add personalization to packaging as an extension of the brand but may be limited to the capabilities of the manufacturers they are working with.”
There also has been an upgrading of sorts with these products. “Generally, retailers are extremely aggressive in elevating their private label program, offering to consumers high-quality items with a reduced margin,” Bocchini says. “This allows more trial and consolidating repeat buying. Products are generally merchandised together with the rest of the branded items, but more focus and promotion is dedicated to them.”
According to Viti, one of the significant benefits of offering a private label brand is building customer loyalty exclusive to the brand establishment.
“Additionally, there is generally more flexibility in pricing strategy as well as greater creativity and control of product formulation and design,” he says.
Deli departments that take stock of the private label program to make the most of its offerings will see more opportunities moving forward.
“It may be a soup or chili that’s native to your region and would sell better under a store brand than a national brand,” Sewall says. “Stores need enough flavors and promoting to make shoppers aware of the private label program.”
“As establishments continue to gain traction with private label brands with regard to building customer loyalty and trust, we view the segment in a continuing growth phase that offers quality and better value exclusive to the store brand,” Viti says.
All private label dollar share and private label dollar sales for each period.
|Period (as of 8/7/22)
|% Change vs YA – Dollars
|TOTAL PB DOLLAR SALES
|Deli Prepared Foods