Sector Trend Analysis – Private label in the United States

Market overview

The U.S. private label packaged food market grew steadily over 2017 to 2021 to US$73.8 billion in 2021 by a CAGR of 3.8%. Private label products have a 16.3% market share in the packaged food market, lead by processed fruit and vegetables (39.7%), dairy (33.7%), and edible oils (31.8%). Confectionary was the fastest growing segment by 5.6%, followed by sweet biscuits, snack bars and fruit snacks (5.4%), and processed meat, seafood and meat alternatives (5.2%). Of these segments, private label confectionary has the most room for growth with a market share of only 2.7%.

Excluding dairy, the largest private label sub-sector is baked goods with a market size of US$9.2 billion (2021), followed by processed meat, seafood and meat alternatives (US$7.0 billion) and frozen processed food (US$5.1 billion), and processed fruit and vegetables (U.S.$6.7 billion). These combined account for almost half (46.5%) of the U.S. private label packaged food market.

Due to high inflation in the U.S., many consumers are increasingly turning to private label products due to their competitive pricing against their name brand counterparts. Many retailers are also taking steps to expand their assortments of private label products to drive sales growth. Discounters, which offer deeply discounted goods and strong private label assortments, are ahead of the game and benefitting especially from this trend. Growth in private label products is also being driven by premiumisation, which brings value and quality to private label products and attracts a more affluent consumer as well as retain existing consumers.

Private label increased sales faster than branded products in over half of all sub-sectors, rising fastest in plant-based dairy (9.4%), confectionery (5.6%), and processed meat, seafood and meat alternatives (5.2%) over 2017-2021. The market size gaps between private label and branded products were largest in baked goods, confectionary, ready meals, and processed meat, seafood and alternatives to meat, suggesting highest potential for growth for private label in these sub-sectors.

Health and wellness

Private label health and wellness (HW) products grew to US$22.7 billion in 2021, by a CAGR of 2.3% over 2017 to 2021. 'Naturally healthy' was the leading private label HW segment at US$9.0 billion in 2021 and a 20.1% market share, followed by 'Fortified/functional' (US$7.1 billion) and 'Better for you' (US$2.8 billion).

With a CAGR of 8.3% between 2017 and 2021, 'free from' was the fastest growing private label HW segment, reaching US$882.3 million in 2021. On the other hand, sales of 'Fortified/functional', the second largest private label HW segment fell by a CAGR of −2.1%.

Product innovation

Consumers' post pandemic financial concerns and home-based lifestyles are driving interest in cost-effective, but high-quality brands as well as healthier offerings. PLs are adapting to this consumer shift by developing product ranges catering to these specific needs, lifestyle preferences, and tastes at more affordable prices than name brands.

With relatively high inflation expected to last for at least the remainder of 2022, continued improvements in the quality of innovations in private label products could result in an expanded customer base as economic conditions eventually improve, as was the case in the wake of the Great Recession of 2007-2009, where shopping preferences that existed beforehand became expectations. As a result, high inflation in 2022 is likely to lead to a permanently elevated share of private label sales across product sub-sectors.

Vegetables, seasonings, and bakery products were the sub-sectors with the most private label launches between 2017 and 2021. The bulk of private label launches are made up of new products, new varieties, and new packing. Seasonings had the most new product launches, followed by vegetables, sweet biscuits/cookies.

The most common claim made in private label launches are 'kosher', followed by 'no/low', 'free from', 'microwaveable', organic, and 'ethical' claims, emphasizing health and wellness, convenience, and quality in private label claims.

Competitive landscape

ALDI Group, Kroger, and Target were the supermarket chains with the most private label launches and new product launches in the U.S. over 2017-2021.

ALDI Group

ALDI group is a German based food retailer that operates in various countries around the world. The U.S. is the only market where both entities of ALDI group are present - ALDI Nord and ALDI Süd.

According to Euromonitor, ALDI Süd has positioned itself in the U.S. as the "low price leader" with the goal of increasing its visibility as well as accessibility to new shoppers. ALDI Süd aims to expand to 2,500 stores nationwide by the end of 2022 and is planning to further invest in its distribution centres. ALDI Süd's expansion is expected to put it on track to become the third-largest grocer in the U.S. by 2022. Increasing prices due to inflation are driving more consumers towards discounters where ALDI could potentially benefit.

ALDI Nord has been present in the U.S. since the 1970s when it acquired California-based grocery retailer Trader Joe's. Trader Joe's sells higher class and premium quality private label products to more affluent customers. Trader Joe's operates relatively small stores with a limited number of SKUs while offering largely private label products at high value for money, focusing on specialities, delicacies and organic products.

Private label products are responsible for about 90% of ALDI group's total sales. ALDI Group launched 3,174 product from 2017 to 2021, the most among all packaged food companies in the U.S. Hard and semi-hard cheese, meat products, and poultry products were the sub-sectors with the most launches.

Kroger

Kroger's is a U.S. based food retailer that operates nationally under the Kroger banner and under numerous regional supermarket banners: Harris Teeter, King Scoopers and Ralphs. Kroger also operates discounter chain Ruler Foods and hypermarket chain Fred Meyers.

According to Euromonitor, sales of Kroger's private label products accounted for over 30% of its overall retail sales in 2018, with almost half of Kroger's private label products manufactured in Kroger-owned food production plants. Kroger's private label products are found in the premium, mid priced, and economy segments of packaged food under the names Private Selection, Simple Truth, and Kroger Value. The company launched 2,852 products from 2017 to 2021. Bakery, vegetables, and meat were the most common private label product launches.

Kroger continues to shift its private label focus to sustainability and Fair Trade certification in order to cater to younger consumers and their more socially responsible shopping habits.

Target

Target Corp is a U.S. based retailer that operates mass merchandiser, hypermarket and variety stores across the U.S. Target is the U.S.' largest mass merchandiser and is the closest rival to Walmart Inc.

Target's private label products are found in the premium, mid priced, and economy segments of packaged food under the names Good and Gather, Simply Balanced, and Market Pantry. The company launched 2,109 products from 2017 to 2021. Vegetables, bakery, and cakes/pastries were the sub-sectors with the most launches.

According to Euromonitor, Target is expected to expand its organic and natural food product offerings through its private label brands. Eating "clean" and organic has also become more popular amongst consumers, especially younger ones, who are looking to stay healthy and not harm the environment with their food products. Target is also starting to offer environmentally friendly products with simple and natural ingredients to reach out to younger generations. Its mid priced private label brand Simply Balanced offers food products without artificial flavours or preservatives, and more than half of those products are organic. Target's premium Good & Gather private label brand offers many organic products without artificial sweeteners or high fructose corn syrup.

Product launches

Over 2017 to 2021, 33,738 private label products were launched to the U.S. The most popular product claims were Kosher, no/low, gluten free, and microwaveable. ALDI launched the greatest number of products, followed by Kroger and Target.

New product examples

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For additional information on the Private Label Manufacturers Association's annual trade show, please contact:

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Resources

• Euromonitor International:
  • Retail Corporate Strategies in Private Label (June 2022)
  • ALDI Group in Retailing (August 2022)
  • Kroger Co. Company Profile (February 2020)
  • Target Corp. Company Profile (January 2021)
• Mintel GNPD, 2022
• Boston Consulting Group – The Private-Brand Imperative for Grocers (April 2020)
• GlobalData – TrendSights Analysis 2021: Private Label Evolution (December 2021)

Sector Trend Analysis – Private label in the United States
Global Analysis Report

Prepared by: Kris Clipsham, Market Analyst

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