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Private-label merchandise sees dramatic sales increase

Grocers continue to ring up sales across their private brands, but supermarket operators have some challenges ahead.

Sales of private-label merchandise has dramatically increased in the past year, hitting $138 billion across multiple retail outlets and convenience stores in the United States. Supermarket operators single-handedly rang up $68 billion in private label sales in 2017, according to data from the Food Marketing Institute (FMI) and IRI. The data was revealed in the first half of a four-part series, called “The Power of Private Brands from the Register 2018.”

While this was a slight decline of 0.1% for supermarkets, private brands represent 16.4% of dollar sales in the grocery channel and 14.8% across multiple retail outlets and convenience stores.

According to data, 69% of consumers said it’s very important, or somewhat important to have a good assortment of private brands in food and beverage. Generation X is responsible for 31% of all dollars spent on private brands across all outlets, compared to 19% each for older Millennials and younger boomers.

Private brands also influenced 46% of consumers in their choice of where to shop in 2017. However, this can also work against supermarket operators going forward, as retailers outside of the grocery channel, such as mass merchants, dollar stores and club retailers, are all out-performing supermarket operators when it comes to private brand sales. For example, private label is driving 1.6% growth across these three categories, according to the study.

One culprit could be that trips per buyer are down in the grocery channel, and most likely these shoppers are going to other retail channels, such as mass and club, the study revealed.

Sales could also be impacted by grocers pulling back their private label advertising. A year ago, retailers seemed to be promoting too much, as a percent of sales on promotion was up. In fact, private brands increased promotions about twice as much as the overall food business.

“Grocery retailers might need to consider whether they have pulled back too much on promotions,” the study said. “If things were different, reduced promotions might be a healthy response. However, under the circumstances, retailers probably want to examine whether more price and display activity would be successful in advancing their store brand cause against mass, club and other channels.”
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