Private label potential

by Lynn Petrak
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Store brand and private label baked goods draw in consumers looking for quality, convenience and value.

In today’s ever-competitive retail environment, private label continues to be an area of interest, if not a hotbed of innovation and activity in some categories. In October, Omaha-based ConAgra Foods made headlines when it announced that it is selling its private label operations to TreeHouse Foods, Oak Brook, Ill., for nearly $3 billion, expanding TreeHouse’s presence in private label dry and refrigerated grocery. Earlier this year, reports surfaced that Amazon is readying a line of private label grocery products, including foods.

Consumer research bears out the strength and continued potential of private label and store branded packaged food products. In a recent report on private label, Chicago-based Information Resources, Inc. said U.S. consumers spent $120 billion on private label products last year, an increase of 2.1% from the previous year. According to the Private Label Manufacturers Association (PLMA), nearly one out of every four products sold and $1 of every $5 in sales come from store brands.

Within the retail sector, the mass merchandiser channel is particularly strong for private label and store brands. I.R.I. found that the general food department experienced an increase of 1.2 unit share points in that sector last year. The 2014 Mass Merchant Shopper Engagement Study from the Chicago-headquartered Point of Purchase Advertising International (POPAI) showed that private labels are especially strong among shoppers of donuts and pastries in the mass channel.

In the supermarket arena, some types of private label bakery and bread products do better than others. According to a recent blog article published by POPAI, private label hamburger and hot dog buns are more popular than branded products. To move other private label items, like bread, POPAI recommended that new varieties of private label packaged bread be featured in circulars or coupons, while advertising may bolster impulse buys of private label bagels and tortillas.

Within private label in the grocery channel, there are pockets of innovations in both product and packaging. Better-for-you/healthy bread and baked goods are one example. More private label manufacturers are offering healthier options like bread made with whole grains, multigrain or ancient grains or have added gluten-free offerings. In 2014, for example, the Raley’s chain of supermarkets introduced a new line of better-for-you store brand bread under its own Well for Life brand.

According to a recent study from Daymon Worldwide in Stamford, Conn., only 22% of consumers think national brands are better health-wise than private label brands.

“Product innovation abounds in private label bakery products, as suppliers are providing great-tasting all-natural baked goods not only in gluten-free but in sprouted breads and rolls, sugar free and No Sugar Added bakery products as well,” said John Crocco, director of bakery for Daymon Worldwide.

Indeed, gluten-free is a growing area for private label bread and baked goods, Mr. Crocco said.

“The availability of new gluten-free flours allows innovation by the gluten-free bakeries to create new gluten free bakery that has longer shelf life, new flavor and texture profiles that are trendy and can be sold in an ambient room temperature instead of the traditional freezer case,” he said. “Retailers want to go market with these products in their all Natural/Healthy Lifestyle or Pharmacy areas of their stores.”

Mr. Crocco said that in both the traditional and healthy corners of private label bread and baked goods, opportunities come from both the high end and the price-oriented part of the market.

“The demand for store brand/private label breads, rolls and baked goods sold in the center store area is high when the retailer makes available baked goods that are in a premium tier — equal to or better than the national brand equivalent — and a value tier” he observed, adding that the benefits of price apply to both. “Private brands bakery is usually priced 15% to 20% cheaper than the national brand equivalent, so in both tiers — premium and value — this affords the consumer a considerable savings.”

To compete with national brands in the premium tier, promotions may help a private label or store brand stand out against the branded competition and against the in-store bakery.

“Consumers only spend approximately 13 seconds in the commercial bakery aisle in center store, so it is important for the retailer to provide well-stocked, eye-catching half-aisle endcaps and table displays with these products,” Mr. Crocco said. “This will create impulse buying and plays a key role in selling products in both private brand tiers with the consumer.”

He also underscored the importance of packaging when staying competitive with branded bread and bakery products.

“Packaging is not the old plastic clamshell with the traditional black and white label,” he said. “It has improved not only in creating better shelf life for bakery products but also in the area of looks and catchy designs and sleeves and wrap-arounds to help get that consumer impulse sale.” He pointed to beneficial product call-outs on the front of the packaging and a listing of easy-to-read, cleaner ingredients.

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