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  • Writer's pictureDiana Sheehan

The Private Label Paradox: Consumers Expect Innovation and Value

 

Aldi Store Photos - Taken by Diana Leza Sheehan


The private label landscape has seen continuous growth over the last few decades. In recent thought leadership, we have established the surge in private label popularity and the opportunity it presents to manufacturers and retailers. First, we discussed private label potential, exploring the size and growth of private label sales across categories. Next, we outlined general consumer attitudes about private label. Now, we delve into the critical role of innovation in private label strategies.


As consumers become more discerning and value-conscious, retailers must move beyond just offering a lower price point and focus instead on capturing consumer attention with quality and unique features. However, the competitive landscape is constantly evolving. Today's shoppers are inundated with choices, and their expectations are continuously rising. Simply keeping up with the status quo will not guarantee success. We will explore how private brands can leverage innovation to not just stay relevant, but to truly thrive and build lasting customer loyalty.

 

Growth in unexpected places

We established through recent PLMA/Circana reporting that private label continues to grow. As we look at the importance of innovation, we must first understand who among US shoppers is buying more private label today. More than half (55%) of US shoppers say they are buying more private label products than they did last year. However, data illustrates that younger consumers and high-income consumers are significantly more likely to be buying store brands this year versus last year. This not only reinforces that all consumers buy private label but also illustrates that even though price matters, higher end consumers are looking for value in new ways today.


Graph showing consumer segments by age and income level showing whether they are buying more, the same or less private label
©PDG Insights 2024 – Private Label Consumer Pulse Study

We then asked why people are buying more private label. Generally, consumers leaned into one of several themes: price, quality, quality and selection.


Why are consumers buying more private label

Word cloud summary of why consumers say they are buying more private label
©PDG Insights 2024 – Private Label Consumer Pulse Study

Price was the overwhelming reason mentioned for consumers buying more private label. Inflation and rising grocery costs are causing people to seek out cheaper alternatives. Interestingly, many respondents also mentioned that the quality of private label products has improved. Some felt the quality was on par with national brands, while others felt it had even surpassed them. This lead to a focus on value. People are looking for products that offer excellent quality at a lower price. Private label products are filling this need for many consumers. And this all leads to innovation within the space. Consumers recognize that there is a wider variety of private label products now available, and it is encouraging people to try them.


The chicken or the egg…

In their own words, consumers admit that they are buying more private label because there are more options available to them. Paired with an acknowledged quality parity with national brands, it is easy to see how the market has been ripe for growth. Yet, do consumers take new product offers for granted or are they expecting retailers to drive that pipeline of new offers? Most consumers expect retailers to continuously innovate in private label to drive interest and loyalty. In fact, nine of ten consumers said that it was at least somewhat important for retailers to continue to innovate, and thirty percent of consumers said it was extremely important. Like other metrics, we see that consumers under 45 expect more of retailers. Those under 45 are significantly more likely to say that innovation is extremely important in private label for retailers to drive loyalty. We also saw that for those consumers with household incomes greater than $75,000 per year, they state it is extremely important.

graph of consumers by age/income segment saying if they find innovation in private label important
©PDG Insights 2024 – Private Label Consumer Pulse Study

Investing for Future Success

On the bright side, these growing consumer segments expect a lot of their retailers in private label, but they also reward retailers that do a good job with their loyalty.  The availability of unique and innovative private label products influences where consumers shop. We see in our earlier reporting more than half of consumers will choose one grocery store over another due to private label assortment, but for younger consumers, particularly those under 35,  it’s the availability of totally unique and innovative products that is most influential.  Retailers like Trader Joe’s, Aldi, and Costco have found ways to lean into unique and exclusive private label and drive sales growth and foot traffic.

Graph of how private label innovation impacts retailer choice by age segment
©PDG Insights 2024 – Private Label Consumer Pulse Study

Why Does this Matter?

The message is clear: consumers are no longer satisfied with simply good deals on private label products. They crave novelty, quality, and a unique shopping experience. Retailers and manufacturers who embrace innovation in their private label strategies stand to reap significant rewards. By catering to these evolving consumer expectations, they can not only secure brand loyalty and drive sales, but also become trendsetters within the industry. The future of private label belongs to those who dare to disrupt the aisles with fresh ideas and a commitment to exceeding customer expectations.


For manufacturers, this presents a tremendous opportunity to partner with retailers on developing innovative private label products. By leveraging their expertise and production capabilities, manufacturers can gain valuable insights into consumer trends and expand their market reach. This collaborative approach can be a win-win for both parties, solidifying their position in the ever-evolving retail landscape.

 

PDG Insights fields ongoing thematic thought leadership throughout the year. This study was fielded by PDG Insights and sponsored by the team at FoodOn. Please reach out to Diana Sheehan with PDG Insights to learn more about what is available or to explore consumer or shopper insights needs that you might have.

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