Store brands shine as consumer wallets tighten
Food and drug retailers have enjoyed sustained sales of private label products, driven by new shopping patterns adopted during the pandemic, ongoing improvements in the quality of the products and consumer demand for money-saving solutions.
“During the pandemic, consumers tried different items — it may have been because of a lack of other items on the shelf — and they stuck with it,” said Peggy Davies, president of the Private Label Manufacturers Association. “That seems to be what we are seeing in the sales numbers.”
While private label sales have increased overall in 2022, their growth has lagged in the drug store channel, according to IRI. For the 52 weeks through Sept. 4, dollar sales of store brands in the drug store channel were up 4.3% over the year-ago period. That compared with 6.6% sales growth across all products.
[Read more: Kroger offers Thanksgiving staples at affordable prices]
Overall, retailers have been effective at calling attention to their private label offerings, Davies said, and private label manufacturers have also done their part by creating innovative product solutions.
“Retailers have made sure that their brands are noticed, both online and on shelf, and that the quality is there, plus some,” Davies said. “I don’t think it’s just about the economy anymore.”
Consumers’ increased interest in health and wellness has also expanded demand for private label solutions at retail, she said.
Davies cited Costco Wholesale as an example of a food-and-drug retailer that focused on store-brand private label health and wellness products. The warehouse club operator has been featuring its own pharmacists in ads promoting its store brand OTC medications, Davies noted.
Products in the ads include Kirkland Signature Aller-Flo, a nasal spray, and Kirkland Signature AllerClear, an antihistamine tablet. The retailer is also featuring the ads in its Costco Connections magazine.
Traditional drug store operators, meanwhile, have been sharpening their focus on private label.
[Read more: Local brands’ value proposition buoy Ahold Delhaize’s Q3 sales, earnings]
Rite Aid, for example, is in the process of revamping its private label line, which it said could play an important role in driving increased profitability.
“As consumer discretionary spending comes under significant pressure, we're investing in our own brands, which provide value and options for the customer,” said Heyward Donigan, CEO, in a June conference call with investors, adding that the chain is in the midst of a process to “repackage, rename and relaunch” its own brand portfolio.
Walgreens, meanwhile, is seeking to drive increased sales of private label in new and existing categories, company president John Standley said in a recent earnings call. “We’re making some good investments there in terms of how we go to market and how we position it within the store,” he said.
Walgreens also recently named Walmart and CPG products company veteran Marty Esarte as its group vice president of owned brands.
CVS has placed increasing emphasis on its private label assortment in recent years. The company’s CVS Health brand is its top-selling brand in the front of store, and private label products account for almost a quarter of total sales, Brenda Lord, vice president of store brands and quality assurance, said in an interview with the National Retail Federation earlier this year.
The retailer recently expanded into private label durable medical equipment, such as canes and walkers, with a line of CVS Health by Michael Graves Design products.