Private label demand surging as inflation rages: report

Dive Brief:

• Inflation is prompting a surge in demand for private label offerings across a wide range of different foods, according to a report from shopper intelligence firm Catalina.
• Private brand categories showing the biggest gains for the year to date through July 17 include baking mixes (up 40%), soup (17%), prepared foods (12%), dried vegetables (11%), canned fish (10%) and cereal (6%).
• After losing ground to big-name brands during the pandemic, store offerings have gained momentum as consumers look for cheaper substitutes to save money.

Dive Insight:

As consumers face higher expenses for everything from gasoline and housing to travel and food, they are looking for any way to save a few dollars. Private label items in the grocery store have been among the biggest beneficiaries. It’s a welcomed rebound for a category that struggled during much of the pandemic as consumers turned to familiar branded offerings.

Prices for food-at-home jumped 12.2% during the past year, the largest 12-month jump since April 1979, according to June data from the Bureau of Labor Statistics’ Consumer Price Index. Prices of all of the major food categories tracked by BLS increased significantly during the past year, led by cereals and bakery products, up 13.8%; dairy and related products climbing 13.5%; and meats, poultry, fish and eggs, rising 11.7%.

Catalina noted the increase in unit sales for private-label canned fish and soup, indicating consumers are looking for affordable lunch and dinner solutions. Private label cereals have thrived with brand-name cereal prices rising between 10% and 11% in 2022, it said, citing USDA data. And while the pandemic-fueled trend of scratch baking has declined, baking mixes have seen a jump as time-starved shoppers turn to them for convenience, the shopper intelligence firm said. 

“The data clearly indicates that shoppers have become more price-sensitive and value-driven in recent months,” Sean Murphy, Catalina’s chief data and analytics officer, said in a statement.

Walmart told analysts in May that consumers are moving from brand names to private label substitutes in deli, lunch meat, bacon and dairy. Steve Oakland, CEO of TreeHouse Foods — the nation’s largest manufacturer of private-label products — noted around the same time that consumers are looking to the segment “as they manage a higher cost macro environment and seek better value.”

The uptick in demand for private label items could be a boon for companies who manufacture these products, such as TreeHouse and Post Holdings.

TreeHouse, which reports earnings early next month, is reportedly close to a deal to sell its meal-prep business for $1.3 billion. The increase in private label consumption has so far proven to be a positive for the long-struggling company, and it could provide it with an impetus to offload its meals division while demand is high.

After thriving during the pandemic, large CPGs are paying close attention to the groundswell in demand for private label foods and how it is impacting their businesses.

Campbell’s Soup CEO Mark Clouse said in early June the soup and snacks maker was experiencing “some continued share pressure from private label” in areas like condensed soup and its Swanson brand.

Conagra Brands CEO Sean Connolly said last week during the company’s earnings call that “private label is gaining some share more broadly in food.” Still, he said the maker of Banquet, Healthy Choice, Marie Callender’s and Birds Eye has not seen a meaningful shift toward private label “in the heavily branded categories in which we compete.”  

At B&G Foods, the owner of Green Giant, Cream of Wheat and Ortega, CFO Bruce Wacha noted in early May that as prices climb it expected a migration to private label, “particularly on some of our products that have really big cost increases.”