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The Pandemic and Private Label

October 19, 2020

Covid-19 is changing consumer behaviour. One outcome is the potential for powerful gains in private label purchasing, especially in food retail.

Here are six reasons why the current market could mean mighty private label growth.

In Service of Out-of-Stocks

The first weeks of the pandemic threw every routine into chaos – including grocery shopping. Getting to the store suddenly became a challenge for a generation of shoppers that have never really known shortages or line-ups. Favorite brands were suddenly out-of-stock, but the new perilous trials of shopping made private label substitutes welcome – and often gratefully received. A July 2020 Daymon Associates report states 70% of shoppers reported trying new brands since the crisis began. Necessity creates brand ‘blindness’.

Desperately Seeking Safety

A safe and completed grocery shop has become a far more important shopping priority than price. Before the pandemic, at least 50% of customers split their grocery shop between at least two stores. Now shoppers want to get in and get out of a one-stop-shop, or they will pay for delivery. Cherry picking isn’t worth the risk and many will stick with the retailer that offers them service and safety first vs. the week’s best price their favorite national brand. Retailer trust can inspire loyalty to try more of a retailer’s private brands.

Private Label in the Pantry

60% of customers are now doing more in-home cooking. And home meal preparation requires stocking up on many centre aisle commodities and meal makers: rice, pasta, and flour – the #1 shorted food items in the first weeks of the pandemic. Oils, sauces, spices and baking items are also kitchen staples.  There are many private label bargains in these now-often-used commodities.

Real Rising Prices

Covid-19 created a set of conditions that caused food prices to rise. As of August 2020, according to Statistics Canada, general inflation held at zero while food inflation is up 3%. Many factors contribute to this: early panic buying causing shortages, an insecure food industry work force (plant shutdowns caused beef prices to practically double in June), higher transport costs (because of demand for delivery), and a low Canadian dollar buying expensive overseas products. We will continue to see higher prices in all products, including frozen. And any household that is buying on line is paying even more – trading a delivery cost for the extra security of not having to shop in person.

Real Income Restraints

In our pre–Covid-19 economy, the cost of housing and education already placed pressure on the variable spending of food and household needs. As of August 2020, the rate of unemployment in Canada was 10.2% – compared to 5.7% a year ago. For many experiencing job loss and insecurity, the discretionary dollar is scrutinized even more. Private label can offer a simple way to save – up to 50 to 60% in some categories – and help household funds go further.

Online Retail Revolution

Online merchandising changes the playing field for retailers and can even up things for private label. According to SuperMarket News, almost 40% of consumers have tried purchasing groceries online (vs. less than 5% just two years ago).  Retailers have an opportunity to create digital marketplaces that point shoppers towards higher margin and price sensitive items. A grocery store visit might have once been inspired by compelling front-page flyer prices, and in- store displays or sampling (paid for by national brands) created more impulse purchases. However, the consumer is navigating an online store in a different way. The choices are not limited by what fits in a flyer page or an end cap, and shoppers can easily click through to see all their choices in a category. A retailer’s online site can provide far more interesting meal ideas than flyers and private label can show up to round out offers and ingredient lists. Most sites don’t yet have a ranking by price (only a retail range within the category), but price filters by 100g could be a future filter refinement. Retailers can fulfill their ad plan contracts and still have private label appear in the front lines of clickable options.

Does your brand offer attractive private label options? Or do you need some retail renovation? Now is the time to make sure you have cost-conscious options for customers today.

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