The American consumer continues to vote for private brands in unprecedented numbers. So the question is, what is driving this trend? Perhaps it is the continued increase in consumer quality scores of private brands. Or, it could be the proliferation of alternative formats like ALDI and LIDL. Perhaps it is retailers like Walmart, Dollar General and Kroger that have doubled down on their own brands in unprecedented ways. It’s probably a mixture of all those factors, but one thing is certain, consumers expect their store to offer a wide variety of private brand choices. In the case of formats like ALDI, it is their the consumer’s only expectation.

As a retailer, private brands were the profit generator of the category. Rarely did consumers price compare private brands from one retailer to the next. The comparison was always against the national brand on the shelf. The benchmark of national brand comparison still exists. What’s new is many retailers now using private brands, more than ever, to drive competitive price perception and grow sales.

Retail margin compression has occurred in several KVI categories and items. So how can these retailers afford that margin compression? The answer is in the continued expansion of private brands into many categories. As retailers put priority around their brands in all categories, they have incrementally improved margins in those non-KVI categories and items. That strategy has paid the bills for the margin compression in the key KVI items that sets their price impression. The side benefit has been building even greater loyalty to the store’s brand and growing sales in categories that consumers may not have otherwise purchased without a private brand alternative.

Millennials, Gen Z, and Gen X have grown up to be less brand loyal and are more enticed by value for their money. As long as the quality meets their minimum expectations, they are brand agnostic more than any other generation.

These generations are who is driving the growth in limited selection formats like ALDI, Trader Joe’s and Costco. It is part of what is driving them back to formats like Walmart, as well. Consumers are expecting value and quality alternatives that will fit their budget and lifestyle. Take Costco for example. Laundry detergent has typically been a tough category in which to gain private brand acceptance and sales penetration. At Costco, the KIRKLAND brand laundry pods are on consistent display and command a high percentage of the category sales. How many of your customers are seeing private brands displayed this way in your competitors? Are they buying their brands and not yours because you do not carry that alternative? What price perception message is that sending to your customers? Are you losing sales because no matter how good your ad prices are periodically on the national brands, you aren’t offering your customers a choice in private brands?

4 Action Plans to Grow Sales with Private Brands

  1. Broaden your selection in all categories. AWG now offers over 5,000 SKUs across Best Choice, Always Save, and Clearly. Don’t leave any category “naked” without private brands that could send the wrong price perception to your customer.
  2. The good, better, best strategy is centuries old, but still works. We talked earlier about how retailers are paying for tmargin compression in KVI categories on private brands by expanding margin-enhancing private brands to more categories. The AWG Brands team has also added more items and tiers of private brands in those margin-enhancing categories, as well. Best Choice and Always Save were designed to capitalize on that opportunity. In many cases, when a category contains both Always Save and Best Choice, the category sales overall grow and the majority of customers trade up to Best Choice or even the national brand. It is the ability to see those comparisons and make that choice that they are looking for more than ever. Carry your full complement of Always Save and Best Choice.
  3. Private brand displays are not all about can vegetables, sugar, and flour anymore. Rotating many categories across your displays with private brands is essential. Consumers are more conscious about what they see in any given store. “Perception is reality” is not just a catch phrase, it is true consumer behavior.
  4. Don’t forget about private brands in your ads, social media, and all forms of marketing. Planting that value and quality perception in everything you do is critical.

SEE ALL OF AWG BRANDS AT AWGBRANDS.COM ALSO, CHECK OUT CLEARLY’S NEW WEBSITE! CLEARLYBRAND.COM

GROW PROFITABLE SALES: Contact your District Sales Manager or AWG Brands Representative for information about all the AWG Brands marketing assets that can be utilized.