Amid the shutdowns and stay-at-home orders, our food supply chain and grocery retailers have risen to the challenge. While demand across the board rose, private labels have gained sales disproportionately — increasing by 29%, outpacing national brand product sales, which grew by 24%, according to the most recent data from Nielsen.
Private labels have also gained many new customers in recent weeks due to limited shelf selections and consumers focusing more on value when shopping. After trying a private brand for the first time, 60% of US shoppers said they would continue to buy the store brand option, according to research consultancy Magid.
For private brand retailers to be ready for the New Next, grocers must focus on growth, agility, transparency, accuracy, and brand protection.
The private label selections on the shelves today were developed to reflect different times. Consumer behaviors have changed, and their grocery needs with them. A rapid and flexible response is necessary. Retailers must act quickly to tailor their offerings to changing customer needs and be prepared to experiment and evolve. Such speed means developing and launching new products in weeks instead of months, necessitating closer than ever collaboration with product suppliers.
“This is going to be an exciting time over the next two to three years for private brands to capitalize on growing penetration,” says John Evans, Director of Private Brands, Weis Markets. (Watch the webcast replay of the My Private Brand’s: COVID-19: Leading with Private Brand for more insights.)
Consumers’ trying private labels for the first time and those increasing the range of private brands they buy will be looking for reassurance that they are getting quality products. Consumers who can’t find the information they need will simply return the product to the shelf.
Retailers need to provide complete information about ingredients and sources through multiple channels. The retailers that only make the minimum information available will be at a competitive disadvantage. Just as important is a focus on labeling accuracy going forward. Labeling errors account for around 50% of product recalls, and in the case of undeclared allergens, those that are not detected in time can have irreversible consequences.
Even in the best of times, when a food contamination incident occurs, finding affected products and notifying suppliers can take days and sometimes weeks, especially when dealing with hundreds of manufacturers and thousands of products. During a crisis, it can be overwhelming.
The risks of not being prepared are high. In the past, food contamination incidents have impacted customer trust, brand loyalty, and the bottom line of companies involved. Research by Allianz found recall costs could reach $10 million for significant events.
For retailers, this means having complete and accurate product ingredient information and working with trusted suppliers that have the required certificates and are subject to regular factory audits and product testing.
As private brand momentum in grocery retail has picked up in the last decade, the blunt reality is that most retailers have not adequately invested in either the processes or systems needed to support their programs. Despite the complexity of food products, the many regulations they must conform to, and the dire consequences when things go wrong, collaboration with private brand manufacturers is too often managed using only spreadsheets and email.
By contrast, leading grocers have already embraced cloud-based collaboration solutions for brand compliance, which enables retailers and suppliers to work together directly. Because of the efficiencies, they’re able to develop and manage a higher number of brand ranges containing more SKUs, allowing leading grocers to pull further ahead of their counterparts who have yet to invest in improved ways of working.