Grocers Bet on Private-Label Sales to Drive Traffic and Build Customer Loyalty

Grocers are increasingly using private-label products to not only boost traffic but also to enhance long-term customer loyalty, driven by economic pressures and evolving shopper behaviors. Here are the key insights from a recent Ibotta survey and other industry data:

1. Economic Pressures Fuel Private-Label Growth

According to Ibotta’s State of Spend report, 72% of consumers have turned to private-label brands due to economic challenges. As consumers become more cost-conscious, they are more willing to trade down from national brands to private-label options. This shift is creating an opportunity for grocers to build brand loyalty through promotions and value offerings.

2. Promotions Drive Consumer Loyalty

The report found that 75% of shoppers are willing to try a new brand if it’s offered at a lower price than their usual choice. Grocers that strategically promote private-label products can not only capture this price-sensitive audience but also retain them long-term by creating ongoing value through discounts and digital promotions. Digital promotions have emerged as one of the most effective and cost-efficient ways to drive this consumer behavior, according to Ibotta’s findings.

3. Shifting Shopping Habits: Essentials Over Discretionary Items

Shoppers are shifting their spending, prioritizing essentials over discretionary items. Categories like alcohol (-8%), plant-based meats/dairy (-5%), snacks (-4%), and frozen foods (-3%) have seen significant declines. Grocers are capitalizing on this trend by pushing essential items, often through private-label options that align with consumer needs for both value and quality.

4. Digital Engagement is Key

Grocers are increasingly investing in digital promotions, as early-stage engagement is driving growth. This trend reflects the broader digital shift in grocery shopping, with loyalty programs and personalized deals becoming crucial for attracting and retaining customers. Consumers are also increasingly looking for digital solutions for budget and time management, including more convenient ways to track and redeem rewards.

5. Private Label Competition is a Concern for CPG Brands

The report highlights a major concern for CPG brands—70% of marketers see private-label competition as their biggest threat. With private-label products rapidly gaining ground (store brand dollar sales were up 34% over the past four years), brands are being pushed to differentiate themselves, build stronger brand equity, and focus on customer lifetime value to maintain their market share.

6. Private-Label Sales Surge

Private-label sales are growing at an impressive rate. According to the Private Label Manufacturers Association (PLMA), store brand dollar sales have increased by 34% over the past four years, with annual store brand unit sales up by 500 million units. The share of private-label products in grocery stores reached a record 18.9% in 2023. This growth is not just a passing trend—it is now a significant part of the grocery industry’s landscape.

Key Takeaways:

• Private-label products are becoming essential for grocers looking to build loyalty and respond to economic pressures.
• Digital promotions and cost-effective strategies are key for capturing the attention of budget-conscious shoppers.
• CPG brands must focus on innovation and differentiation to compete against the growing private-label trend.
• Private-label sales are accelerating, and grocers must leverage this momentum to ensure sustained growth and customer retention.