THEYEARINREVIEW2019
MORE PREMIUM PRODUCTS, PLEASE More retailers are introducing premium store brand lines or adding to them. This trend will continue in 2020 as retailers aim to offer products that are not only better than the national brands,
Retailers realize that premiumization equals differentiation.
but also exclusive to them. Retailers realize more than ever that premium equals differentiation. “We’ve witnessed over the last two years a complete resurgence and growth in the private label industry in the U.S. driven by retailers wanting to be more relevant to their customers and a shift from a need to focus on having the right price point to establishing private brands that are top of mind to consumers and build intimacy with consumers,” Bahige El-Rayes, a partner in the consumer and retail practice of A.T. Kearney, a strategy and management consulting firm, told Store Brands earlier this year. Premium store brands are spurring overall private label growth, representing more than 19% of store brand sales, according to
ALDI’S CONTINUED RISE Perhaps no other retailer was in the mainstream news more in 2019 than ALDI. That’s because ALDI is in the midst of a rapid expansion that will see its footprint grow from more than 1,800 to about 2,500 stores by 2022, making it the third-largest grocery chain in America behind Walmart and The Kroger Co. So when ALDI opened a new store in a community in 2019, the local news reported it. Considering ALDI’s expansion and its more than 90% assortment of
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private brands, its future impact on the industry could reign historically in grocery industry annals. Batavia, Ill.-based ALDI, which opened its first U.S. store in Iowa in 1976, has always been known for its low prices of private branded consumer packaged goods. But in the last five years ALDI has gained a reputation for its quality of private brands in addition to its low prices. It is also garnering recognition as an innovator of store brands and a place to shop for premium and exclusive items.
market researcher Nielsen. “The rise of higher-end store brand products has come hand-in-hand with consumers’ inclination to spend more on store brands,” Nielsen reported. “Discount products still represent the majority of store brand sales in America, but they have ceded three share points in the last three years. Fortypercent of surveyed Americans said they would pay the same or more for the right store branded product, while only 26% of those surveyed feel that name brands are worth the extra price.” Retailers that offer more premium private private brands are seeing more sales, Nielsen noted. “With a premium facelift on many private label products, we’ve seen an interesting impact on discount grocery stores,” Nielsen said. “U.S. value grocery outlets have collectively seen a 4% decline in private label share of wallet. Meanwhile, stores with premium products have continued to see lifts in private label sales.”
“I’m extraordinarily impressed with ALDI,” Carl Jorgensen, executive vice president of Chicago-based market researcher Linkage Research & Consulting and an expert on thought leadership in private brands, told Store Brands earlier this year. “ALDI has raised the profile of private brands and raised its own reputation among consumers.” Simon Johnstone, director of retail insight for Boston-based retail consultant Kantar Consulting, told Store Brands that it took a while for grocery industry pundits to start talking about ALDI’s impact, considering the retailer has been in the U.S. for more than 40 years. But the talk is happening now and is growing louder.
Store Brands / November 2019 / www.storebrands.com
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