FMI: The future is rosy for private brands

Private brands, which saw a surge in popularity as grocery prices have soared, have a rosy future—even as food inflation moderates.

That’s according to a report released Tuesday by FMI – The Food Industry Association titled “The Power of Private Brands 2023: What’s Ahead for Shoppers and Private Brands.”

“Although inflationary pressures may have been the catalyst that prompted consumers to try more private brand products over the last few years, shoppers have clearly come to appreciate the quality and value that store brands offer,” FMI VP of Industry Relations Doug Baker said in a statement. “The overwhelming majority of shoppers tell us they plan to continue purchasing private brands in the future, even as grocery prices normalize.”

In fact, 54% of shoppers surveyed said they expect to buy private brands somewhat or much more in the future, compared to 26% saying the same about national brands. And 90% said they would be somewhat or very likely to continue buying private-label products even if grocery prices decrease.

What’s more, consumers are being motivated by more than just price in purchasing store brands, the report found, with about two-thirds of respondents saying quality, taste and meeting meal solution needs drove their purchasing.

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“Shoppers are motivated to purchase store brands because they like the quality and the taste of the products, not just because of the affordability and value that private brands provide,” Baker said. “This growing trust and loyalty consumers have developed for private brands highlights how these products have really evolved to become and extension of a retailers’ brand and value proposition, which is reflected in the way that private brands are also playing a bigger role in how consumers decide where to shop for food.”

Store brands see record growth

Private brands are indeed a traffic driver: Fifty-three percent of shoppers said store brands are very or extremely important in selecting a grocery store, up from 46% in 2019 and just 35% in 2016.

Store brand dollar sales rose 8.3% during the first half of 2023, while dollar sales of national brands increased 5% during the period, according to Circana data cited by FMI. During the first six months of the year, private brand unit sales declined less (1.2%) than national brands (3.7%), and store brand dollar share climbed to a record 18% while unit share jumped to 22.5%, also a record.

Fresh bakery items saw the biggest share of shoppers selecting store brands, at 31%, FMI said, followed by milk or non-dairy substitutes (29%), non-prescription drugs (26%), paper products (24%), fresh prepared meals (22%), packaged breads (21%) and baby food (21%).

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“Retailers have been successful in treating their private brands as true brands and associating them with the store itself,” FMI noted.

The future of private brands

Shoppers surveyed said they intend to buy more private brands in the future because they are a better value (61%), less expensive or on sale (60%), taste (51%) and quality (47%), the report said.

“The latter two factors are prioritized almost as highly as value and price, which underscores the point that shoppers want private brands to offer benefits on many fronts,” FMI said.

Considering future purchases, 43% of those surveyed said they intend to buy more private-label paper products, followed by salty snacks (36%), packaged breads (36%), milk or non-dairy substitutes (35%), packaged and canned foods (34%), frozen foods (33%), condiments (33%), household cleaning products (32%), baking and cooking items (31%) and fresh produce (30%).

“They survey data shows shoppers expect to buy more private brand items in some categories marked by a significant national brand share,” FMI said.