retail news in context, analysis with attitude

The Wall Street Journal reports on the growth of private label - with its higher margins, lower marketing costs and expanding appeal - and its impact on “big food” companies.

Cited in the story:

• “Retail sales of private-label foods and beverages have notched faster year-over-year gains than branded items for three consecutive fiscal years, according to data from market-research firm Nielsen.”

• “Kroger Co. , the largest U.S. supermarket chain, has almost doubled the number of products it sells under its own brands since 2005. Walmart Inc., the biggest domestic food seller, has invested in improving the quality of its store brands. Rival grocer Albertsons Cos. said it introduced more than 1,100 private-label items in its 2018 fiscal year and that sales of those store brands made up about one-quarter of sales in its latest quarter, up from 23% in fiscal 2017.”

• “Retailers have been building out capacity to offer various store-brand products in addition to hiring manufacturers to make items for them. Walmart opened its own dairy plant, while Costco Wholesale Corp. is developing a poultry-processing facility. Kroger operated 37 food-production plants as of February, according to its annual report.”

The story notes that CPG companies have been cutting prices - even when commodity costs are going up - in order to stay competitive with own-label items.
KC's View:
What a number of these retailers finally have figured out is that success these days comes in the places where they are different from the competition, not similar.

It seems to me that this is going to put real pressure on suppliers to really innovate, rather than just come up with new flavors, sizes and packaging.