Consumers Demand for Private Label Products Soars

The demand for private label products is soaring as consumers face continued inflationary pressures. Here are the key takeaways from the latest report on private label and consumer behavior:

Private Label Growth

• 61.3% of consumers plan to switch to private label products if inflation persists.
• Private label sales have surged, and it’s projected that private label products will account for 21.6% of total grocery sales by 2026, up from 18.9% in 2022.
• 78% of Americans now buy in-store brand products, with significant increases in purchases of private-label pantry (61%) and household (58%) items.

Changing Shopping Behavior

• Consumers are increasingly value-conscious, with notable shifts in how and where they shop:
  • 34.7% of consumers are shopping more at value stores.
  • 61% of consumers say they are purchasing cheaper brands or products.
  • 53% are using coupons more frequently.
  • 29.8% are buying fewer food items, while 23.7% are opting for bulk purchases to save money.

Impact of Value Stores

• The trend of shopping at value stores like Aldi is growing across income brackets:
  • 86.3% of low-income consumers shopped at value stores in 2021, up from 71.4% in 2008.
  • 48.2% of middle-income consumers and 17.6% of high-income consumers are shopping at value stores, showing a marked shift in shopping patterns.
  • Aldi’s foot traffic increased by 10.5% year-over-year, with the retailer reporting double-digit sales growth.

Consumer Focus on Quality and Value

• Despite the focus on value, quality remains a key factor in purchasing decisions:
  • 45% of consumers prioritize high-quality products when shopping for dairy, with 30% focused on low prices.
  • In categories like savory snacks and beverages, price sensitivity is almost equal to the importance of quality.

E-Commerce and Subscription Trends

• E-commerce continues to grow, with 22% of consumers expected to buy most or all of their groceries online by 2024. However, online grocery shopping often results in lower margins due to delivery and fulfillment costs.
• Subscription services for grocery items are becoming more popular, with 12.4% of consumers using subscription services for grocery items, up from 11.8% in 2021.

Retail Response

• In response to these shifts, retailers are adjusting by:
  • Rethinking store formats, with smaller, more convenient locations and an emphasis on fresh, perimeter departments to meet consumer needs for lower prices and personalized shopping experiences.
  • Some are experimenting with smaller store formats to reduce overhead costs while maintaining convenience for consumers.

In summary, private label products are gaining significant market share as consumers seek value, but they also prioritize quality in their purchases. Retailers are adapting by focusing on value stores and enhancing the e-commerce and subscription experience to meet shifting consumer expectations.