Sector Trend Analysis – Private label in the United States

Market overview

The U.S. private label packaged food market grew steadily over 2018 to 2022 to US$83.5 billion in 2022 by a CAGR of 7.2%. private label products have a 19.0% market share in the packaged food market, lead by processed fruit and vegetables (39.6%), edible oils (36.8%), and dairy (34.3%). Plant based dairy was the fastest growing segment by 14.5%, followed by processed meat, seafood and meat alternatives (12.8%) and edible oils (12.5%). Of these , private label plant based dairy has the most room for growth with a market share of 16.0%.

Excluding dairy, the largest private label category is baked goods with a market size of US$11.8 billion (2022), followed by processed meat, seafood and meat alternatives (US$9.8 billion), processed fruit and vegetables (US$7.3 billion), and savoury snacks (U.S.$5.6 billion). These combined account for close to half (41.3%) of the U.S. private label packaged food market.

private label sales increased faster than branded products in over half of all categories, rising fastest in plant-based dairy (14.5%), processed meat, seafood and meat alternatives (12.8%), and edible oils (12.5%) over 2018 to 2022. The market size gap between private label and branded products is largest in confectionary, baby food, ready meals and soups, and savoury snacks, suggesting highest potential for growth for private label in these categories.

The share of private label sales in U.S. grocery grew strongly in 2022 as inflation soared and real per capita income shrank. Demand for private label also benefited from retailers' sales tactics like price freezes on store brand (private label) products as well as consumer awareness of national brands' sales tactics, including "shrinkflation", which consists of reducing packaging sizes while maintaining prices, and "skimflation", which consists of diluting products while keeping prices at previous levels.

Product innovation

Much of the recent innovation in private label has been centred on wellness and sustainability. Retailers are embracing these trends primarily due to increased awareness of climate change and momentum in healthier eating habits that emerged during the pandemic. In addition to being the entry point for lower income consumers seeking affordable food and drink products, health and wellness or ethically certified private label food and drink products allows consumers to enjoy added value without excessive spending.

As inflation is expected to remain high by historical standards, it is expected that consumers will remain price sensitive and seek out private label goods across many product categories and all price tiers, from budget to premium. According to Euromonitor, niche claims bring higher margins and improve image of the retail chain and loyalty of customers. Simplifying ingredients and introducing nutritional and environmental tracking tools will likely help gain shoppers' trust.

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', 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 2019 to 2023.

Discounters such as Aldi and Lidl, which have put private label products at the heart of their business strategies, will continue to benefit from higher private label demand, as they are well-positioned to maintain their price advantage over traditional U.S. grocery leaders such as Target and Kroger, which have responded by expanding their own private label offerings.

According to Euromonitor, grocery chains are expected to adopt multi-price tier strategies for their private label brands. Premium private label will constitute a small but essential share aimed to support the strong image of store brands and help manoeuvre within a changing environment. Premium private label will increasingly penetrate specific category niches and provide retailers with competitive levers.

As the U.S. economy recovers and consumer confidence rises, some shoppers are likely to become more comfortable in paying a little extra for branded products. As this could lead to decelerating demand for private label goods, private labels are expected to continue developing their visibility and develop into "name brands" in their own right.

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. Aldi Süd is the discounter face of Aldi group in the U.S., where as Aldi Nord has been represented in the U.S. by retailer Trader Joes. Aldi group announced in August 2023 their purchase of Winn-Dixie as part of their expansion in the U.S. southeast. The purchase adds approximately 400 Winn-Dixie and Harveys Supermarket locations across Alabama, Florida, Georgia, Louisiana and Mississippi to reach a total of more than 2,400 stores across the U.S.

Aldi Nord has been present in the U.S. since the 1970s when it acquired Trader Joe's. Trader Joe's operates relatively small stores with a limited number of SKUs while offering largely private label products focusing on specialities, delicacies and organic products.

private label products in grocery, household and beauty and health account for 77.5% of Aldi's sales. The highest new product launches from 2019 to 2023 include hard and semi-hard cheese, meat products, and poultry products.

Kroger

Kroger operates nationally under the Kroger banner and numerous other regional supermarket banners: Harris Teeter, King Scoopers and Ralphs. Kroger also operates discounter chain Ruler Foods and hypermarket chain Fred Meyers. private label products in grocery, household and beauty and health account for 22.1% of Kroger's sales. Kroger's private label products are found in the premium, mid priced, and economy segments of packaged food under the Kroger Brand, Simple Truth, Private Selection, Home Chef, and Heritage Farm. Sweet biscuit/cookies were the most common private label new product launched by Kroger, followed by bread and bread products, and seasonings.

According to Euromonitor, in September 2022, Kroger introduced their new private label line called Smartway, a line of non-perishable products targeting price-sensitive shoppers. The range was created by consolidating existing Kroger brands and aligns with streamlined private label initiatives developed by other leading retailers. As part of the deal, Kroger will divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands.

Kroger announced in 2022 that it will buy rival Albertsons in a merger that will form one of the largest grocery store chains in the U.S. with nearly 5,000 stores. The deal is worth US$20 billion and expected to close early 2024.

Target

Target Corp. is the U.S.' largest mass merchandiser operating mass merchandiser, hypermarket, and variety stores across the U.S. Target is the closest rival to Walmart Inc. in the U.S.

Target's foray into private-label brands began with groceries and is among the most successful of leading retailers. private label products in grocery, household and beauty and health account for 15.1% of Target's sales. Target's private label products are found in the premium, mid priced, and economy segments of packaged food under the names Simply Balanced, Good and Gather, Market Pantry, and Favourite day. Vegetables, bakery, and cakes/pastries were the sub-sectors with the most launches.

Target offers environmentally friendly products to reach out to younger generations. 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. For example, Simply Balanced offers food products without artificial flavours or preservatives, and more than half of the products are organic. Good & Gather offers many organic products without artificial sweeteners or high fructose corn syrup.

Product launches

Over 2018 to 2022, 34,047 private label products were launched to the U.S. The most popular product claims were Kosher, no/low, gluten free, and free from. 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 (April 2023)
  • Retail in the U.S. (April 2023)
  • Private Label: Evolution of Premium in Food and Beverage (January 2023)
  • Discounters in the U.S. (April 2023)
  • Supermarkets in the U.S. (April 2023)
  • Aldi Group in Retailing (August 2022)
  • Kroger Co. Company Profile (February 2020)
  • Target Corp. Company Profile (January 2021)
• Mintel Global New Products Database, 2023
• Progressive Grocer
• The Food Institute
• Cision

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

Prepared by: Kris Clipsham, Market Analyst

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