CHICAGO — Store brands have taken a bigger bite out of the snack market, driven by changing consumer perceptions and a growing assortment. Millennials, previously the least trustful of private label products, are now the most likely cohort to buy them, said Jordan Rost, vice-president of consumer insights at Nielsen.
“There has been this incredible shift in growth toward private label,” Mr. Rost said during a presentation at the Sweets & Snacks Expo, held May 22-24 in Chicago. “A good enough offering can and will start to take market share. That is the classic textbook definition of disruption. And I think we’re potentially in the midst of seeing this play out across the landscape.”
Private label has captured 10% share of the snack market with $4,026 million in sales, up 4.8% over last year, according to Information Resources, Inc. Comparatively, the top four manufacturers in the category have 53% share and grew 3.7% over the prior year, and other national manufacturers have 37% share and posted year-over-year sales growth of 2.6%. The total snack market grew 3.4% to $42.5 billion in the recent 52 weeks, according to I.R.I. data.
As retailers have expanded private label offerings in recent years, dollar share has shifted in the snacks category to premium and organic from value and mainstream products, said Sally Lyons Wyatt, executive vice-president of thought leadership at Information Resources Inc.
“(Retailers are) leveraging all aspects of the store to drive some convenient and tasteful options that consumers are gravitating toward.” — Sally Lyons Wyatt, Information Resources Inc.
Additionally, private brands are gaining shelf space for snacks, with total points of distribution up 9.3% compared to a gain of 0.6% for national brands over the past four years, she said.
“The benefit retailers have is they can make some decisions of what goes on the shelves and what doesn't,” Ms. Lyons Wyatt said during a presentation at Sweets & Snacks. “They’re leveraging all aspects of the store to drive some convenient and tasteful options that consumers are gravitating toward.”
The recently announced expansions of heavy discounters Aldi and Lidl in the United States also are fueling the private label surge, said Ryne Misso, director of product marketing at Market Track.
“These are largely private label focused grocery stores,” Mr. Misso said during a presentation at the Sweets & Snacks Expo. “As we’ve seen, even outside of Aldi and Lidl, other U.S. grocery stores are looking to expand not only the quality of their private label but also the diversification of their private label offerings.”
The U.S. trails European markets in private label market share with 16%, which compares with a staggering 52% in the United Kingdom, 42% in Spain, 40% in the Netherlands and 38% in Germany, Mr. Misso said.
“This presents some serious challenges for national brands, especially if the U.S. grocery model starts trending more in this direction,” he added.
To stand out amongst store brands, particularly at Lidl, manufacturers should identify promotional opportunities and partner with retailers to craft a competitive strategy, Mr. Misso said. National brands may also fill gaps in a grocery store’s private label assortment by offering products with a differentiated positioning.