The Evolving Role of Private Brands in Grocery Shopping: Trends and Insights

Table of Contents

1. Key Highlights:
2. Introduction
3. The Changing Perception of Private Brands
4. Economic Stability and Consumer Behavior
5. The Strategic Advantage of Private Brands
6. The Role of Family Dynamics in Brand Choices
7. The Importance of Quality in Private Brands
8. Strategies for Effective Private Brand Management
9. The Future of Private Brands in Grocery Retail
10. FAQ

Key Highlights:

• Recent research from Dunnhumby indicates a slight decline in the perceived importance of private brands among consumers, with a notable drop in the frequency of purchasing private brands over name brands.
• Despite this, the growth trajectory of private brands remains strong, outpacing traditional name brands, particularly among consumers seeking quality at competitive prices.
• Economic stability and shifting consumer attitudes toward spending are reshaping the grocery landscape, influencing how retailers approach their private brand strategies.

Introduction

As grocery shopping continues to evolve, the role of private brands has become a focal point for retailers and consumers alike. Recent findings from Dunnhumby's Consumer Trends Tracker reveal a complex narrative: while the overall importance of private brands appears to have softened, their growth rates defy this trend, suggesting a nuanced relationship between consumers and the brands they choose. The context of economic stability following years of upheaval from COVID-19 and inflationary pressures adds another layer to this discussion. This article delves into the dynamics at play within the grocery sector, examining consumer behaviors, the shifting economic landscape, and strategic approaches retailers can adopt to leverage private brands effectively.

The Changing Perception of Private Brands

The latest data from Dunnhumby indicates a small yet significant change in consumer attitudes toward private brands. In a survey conducted in April, only 43% of consumers reported purchasing private brands most or all of the time, marking the lowest level since the firm began tracking these trends in the fall of 2022. This decline comes alongside a slight decrease in the perceived importance of private brand quality and price competitiveness, both of which dropped by around one percentage point compared to previous surveys.

Erich Kahner, director of strategy and insights for Dunnhumby in the Americas, notes that while the importance of private brands peaked in 2023 amidst rising grocery inflation, it has since moderated to levels still above pre-inflation concerns. The primary driver behind this shift appears to be a decreasing sensitivity to price among consumers. Kahner states, “We read a lot in the headlines about tariffs and about consumer sentiment being vulnerable, but we haven’t really seen the behaviors in grocery stores really start to shift a lot towards that in the last few months.” This indicates that while consumers are aware of economic pressures, their shopping behaviors have not yet fully reflected those concerns.

Economic Stability and Consumer Behavior

The past few years have been marked by significant disruptions, including the COVID-19 pandemic, rampant inflation, and rising interest rates. However, as these pressures begin to stabilize, so too do consumer behaviors. Kahner observes that monthly budgets for consumers have remained steady since early 2024. “Things have been pretty stable economically for the last year or so,” he explains. “Price sensitivity, I think, is still higher than it was [before] all of the disruption, but in the past year, it’s been coming back down in a way that I think is a natural reversion to… a new normal.”

This new economic landscape has implications for grocery shopping. As consumers increasingly focus on fulfilling their everyday needs, their decisions appear less influenced by fears about future economic conditions. Kahner emphasizes that while consumers may delay large purchases due to economic anxiety, their grocery habits remain largely unaffected. “The realities of [consumers’] paychecks and however they meet their monthly budgets at the time are going to be driving their behaviors more so than a fear of the future,” he states.

The Strategic Advantage of Private Brands

Despite a dip in the perceived importance of private brands, their growth outpaces that of name brands, signifying a strategic opportunity for retailers. Dunnhumby's research indicates that those retailers who maintain a robust portfolio of private brands tend to outperform their competitors in terms of sales growth and emotional connection with shoppers. Kahner asserts, “Retailers who are private brand-focused—about 40% of their sales or more going through private brand on average—are much better set up for long-term overall sales growth compared to other retailers.”

The growing consumer perception of private brands as high quality presents another opportunity for retailers. Kahner reports that consumers increasingly associate private brands with quality, often valuing them for their ability to deliver high-quality products at more competitive prices. This shift in perception is illustrated by the recent launches of premium private brands by major retailers, such as Walmart’s Bettergoods line and Target’s Good & Gather brand, which are designed to meet the growing desire for quality.

The Role of Family Dynamics in Brand Choices

An interesting aspect of Dunnhumby’s findings is the variation in private brand importance across different demographic groups. Notably, families with children at home tend to place a higher importance on private brands compared to those without children. Kahner suggests that budget pressures associated with raising a family drive this preference, as parents seek value without compromising on quality. This demographic insight is crucial for retailers aiming to tailor their private brand offerings to meet the specific needs of families.

The Importance of Quality in Private Brands

As consumers increasingly prioritize quality, retailers must adapt their private brand strategies accordingly. Kahner emphasizes that the perception of private brands as high-quality options is gaining traction. “If you compare those two needs—‘private brands give me high quality’ versus ‘private brands save me money’—the more important need to people is getting high quality from their private brand,” he notes. This shift has prompted retailers to innovate and enhance their private brand products, focusing on unique flavors, healthier options, and premium ingredients.

Retailers are responding to this demand for quality by investing in premium-tier private brands. Kahner highlights that supermarkets and regional retailers are recognizing the potential of premium private labels as a means to differentiate themselves in a competitive market. “We see other supermarkets or regional retailers investing in a premium-tier private brand,” he says, reinforcing the idea that quality-focused private brands can cater to a diverse range of consumer preferences.

Strategies for Effective Private Brand Management

To maximize the potential of private brands, retailers must adopt strategic approaches that ensure clear positioning and effective market messaging. Kahner advises retailers to refine their private brand portfolios by eliminating or consolidating inconsistent brands. This process can help sharpen the messaging and enhance the overall customer experience. “While it can be hard and time-consuming, refreshing portfolios by eliminating or combining brands can also sharpen the messaging,” he explains.

Retailers should also aim to develop a flagship private brand that serves as a national brand equivalent, spanning multiple categories. In addition, a premium-tier brand focusing on quality and innovation can attract consumers willing to pay more for superior products. By maintaining a diverse and well-positioned private brand portfolio, retailers can better connect with consumers and drive sales growth.

The Future of Private Brands in Grocery Retail

As the grocery landscape continues to evolve, the role of private brands will remain integral to retailers' strategies. While recent data suggests a softening in the perceived importance of private brands among consumers, the underlying trends indicate that private brands are becoming an essential component of grocery offerings. Retailers who recognize the changing dynamics of consumer preferences and economic conditions will be well-positioned to leverage the potential of private brands in the years to come.

The interplay between quality, price, and consumer sentiment will shape the future of grocery shopping. As consumers increasingly seek value without sacrificing quality, private brands that can successfully navigate these factors are likely to thrive. Retailers must remain agile and responsive to consumer feedback, continuously refining their private brand offerings to align with evolving expectations.

FAQ

Q: Why are private brands becoming less important to consumers? A: Recent research indicates a slight decline in the perceived importance of private brands, which can be attributed to a decrease in price sensitivity among consumers and shifting preferences towards quality.

Q: How do private brands compare to name brands in terms of growth? A: Private brands are currently growing faster than name brands, with retailers that maintain a strong private brand portfolio experiencing better sales growth and emotional connections with shoppers.

Q: What role do family dynamics play in private brand preferences? A: Families with children tend to place a higher importance on private brands, as budget constraints drive parents to seek value while maintaining quality in their grocery purchases.

Q: How are retailers adapting their private brand strategies? A: Retailers are focusing on enhancing the quality of their private brands, investing in premium-tier products, and refining their brand portfolios to ensure clear positioning and effective messaging.

Q: What is the future outlook for private brands in the grocery sector? A: The future of private brands appears promising, as consumer demand for quality and value continues to grow. Retailers who remain responsive to these needs and adapt their strategies accordingly are likely to succeed in the evolving grocery landscape.