Kroger soars on strength of private label brands

Kroger's private label brands are giving the retailer a major boost as shoppers look for relief from soaring food prices. And Kroger is paying attention. 

The Cincinnati-based grocer on Friday reported a 10.2% increase in private-label brand sales for the second quarter ended Aug. 13, a big reason for its strong overall performance during the period. 

As consumers continue to stretch their wallet spend with rising food prices, Kroger on Thursday launched Smart Way—a new opening price point for its Our Brands private label line.

"This increase was led by our Kroger and Home Chef brands. Convenience remains a priority and Home Chef is meeting that need by providing high-quality family meals as a budget-friendly alternative to eating out at restaurants," said Chairman and CEO Rodney McMullen during the earnings call, according to a transcript from financial services site Sentieo.

The grocer’s Our Brands private label portfolio includes Kroger’s Simple Truth, Private Selection, Home Chef and Heritage Farm among others brands.

"The Smart brands initiative is consolidating the sub-brands, just making it easier to shop," McMullen said. "We believe the unmatched combination of innovation, quality and value provided by Our Brands is a clear competitive advantage as inflation remains front of mind for many of our customers."

Echoing these sentiments, Juan De Paoli, VP of Our Brands for Kroger said in a statement that Kroger is "confident Smart Way will have something for everyone. From canned vegetables and bread, to juices and staples, this new product line features the products families need to put an even more affordable meal on their table."

Grocery retailers have reported growing sales of private label items in recent months as inflation-pressed consumers trade down from their favorite brands to save money. 

“As inflation continues to rise, price is becoming more important than brand name for many consumers,” Chicago-based market research firm Numerator said last month when releasing a study on private label brands. “In recent months, the number of consumers who say price is more important than brand name has grown across all income levels.”

At Kroger, shoppers are initially attracted to the private label line because of price. But they're sticking with the products, McMullen said. 

"The movement to Our Brands, what we always find is customers do it initially to save a little bit of money, but they fall in love with the product," he told analysts Friday. "So part of the continued acceleration of growth in Our Brands is driven by the value, but part of it is just the quality of the product."