Grocery-store brands once carried a stigma. With no-frills white packaging that telegraphed bargain basement and low quality, they were a last resort for those on tight budgets.
Today, they are the stars of grocery shelves and refrigerated cases.
From Safeway’s Open Nature to Target’s Archer Farms, grocery brands are challenging traditional brands from food companies, and preserving or improving their own slim profit margins.
“There is really widespread acceptance of store brands among consumers,” said Janet Eden Harris, senior vice president of Market Force Information, which recently surveyed consumers and found that 96 percent said they bought private-label brands at least some of the time. “Sometimes I think they don’t actually know what is a store brand.”
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Sales of store-brand foods and other grocery merchandise took off during the recession, when shoppers practiced a forced frugality. But to the surprise of consumer and food analysts, sales of store brands have remained strong even as the economy recovers.
Over the past three years, those sales grew 18.2 percent, accounting for $111 billion, according to Nielsen. That is more than twice the rate of growth for national brands — 7.9 percent to $529 billion — over the same period.
“We expect private brands will continue to grab share year over year because of investments they’ve made in enhancing quality, innovation and hiring more people with brand experience to help them with marketing and promotion,” said Todd Hale, vice president for consumer and shopper insights at Nielsen.
Hale said consolidation among grocery chains and acquisitions of stores in the United States by European retailers, which stock their shelves heavily with their own brands, were contributing to the trend. For example, Trader Joe’s, which is owned by the German retail group Aldi, sells its own brands almost exclusively.
Additionally, grocery retailers have spent heavily to develop their own brands over the last several years, building test kitchens, hiring culinary experts, improving packaging and testing and retesting their products with consumers. And lower-income shoppers, who have not bounced back quickly from the recession, have stayed cautious about their food budgets.
Patricia DeMarco, a shopper at a Stop and Shop in Lyndhurst, N.J., completed a survey comparing pretzel flats the chain is testing to a low-fat cheese cracker it already sells. “The pretzel thing, it was OK,” she said. “I didn’t like the other thing.”
Stop and Shop conducts consumer testing of what it calls “own brand” products every Friday in different stores. Sometimes its products are compared with one another and other times to national brands. Consumers are not told what products they are testing.
Almost 40 percent of the products sold in Stop and Shop, which is owned by Ahold, a Dutch company, are private label. Most are simply identified by the store’s logo, which insiders refer to as “the wedge.” It also has a large natural and organic line called Nature’s Promise and an upscale snack line, Simply Enjoy.
Juan De Paoli, who oversees private-label brands for Ahold USA, said of the Simply Enjoy line: “I don’t want to say that’s my favorite, but it’s a very exciting one for us. These are gourmet products of exceptional tastes, discovered and crafted by foodies.”
De Paoli said the company’s goal was to market its brands in the same way national food companies market theirs. “We’re doing public-relations events to promote them, reaching out to food critics and commentators, advertising them on TV and billboards and store signage to make sure customers really know what they stand for,” he said.
Marilee Cortez and Krystle Maldonado stopped to take the survey in Lyndhurst. As roommates, they try to shop together, and they said about half their purchases were Stop and Shop private-label products.
“I think they taste just as good as national brands, and in that case, why not save the money?” Maldonado said.
A Stop and Shop Crispy Thin Crust BBQ Chicken gourmet pizza in the store was priced at $4.99 or two for $7. It was stacked in a refrigerated case right next to a California Pizza Kitchen brand BBQ Chicken pizza that was selling for $6.29. The only difference in ingredients between the two pizzas was cilantro; the Stop and Shop version used parsley.
Similarly, an 8-ounce packet of Stop and Shop-brand shredded mozzarella was selling for $2.99, while the same packet from Kraft was priced at $3.49.
Cortez said their purchases of private-label products had been increasing. “The taste is getting better and better,” she said. “I can tell they’re working on it.”
Last month, Consumer Reports published taste tests comparing store brands with national brands. The organization found that 33 of the 57 private-label products sampled were as good as or better than the national brand version.
Consumer Reports said such brands accounted on average for about one-quarter of the products in a supermarket and could save customers as much as 30 percent. (While branded food manufacturers suggest a retail price, grocery stores set the actual prices they charge.)
Nielsen’s Hale said the greatest opportunity for stores to expand their offerings was in foods and other products aimed at Hispanics and other demographic groups, who tend to buy more private-label brands.
Just this month, Safeway began selling a line of products named for Marcela Valladolid, the Mexican celebrity chef and the host of the Food Network Show “Mexican Made Easy,” who is teaming with the grocer.
Similarly, new pizzas with hand-stretched dough in the Safeway Select line of premium products were formulated after a team went to a food show in Italy. Safeway has more than 20 brands, including O Organics, the Snack Artist and its largest brand, Lucerne, which accounts for a majority of the chain’s dairy sales.
“It is a multitiered portfolio in terms of price points, appealing to a variety of lifestyles and packaging and promotion,” said Michael Minasi, Safeway’s president of marketing.
While that may sound like a grocery retailer on its way to becoming a food company, Minasi said the goal was to develop products that filled a consumer need that branded manufacturers were missing. “We don’t see ourselves competing with national brands,” he said. “Customers want to see both.”