Private Label Presence Expands In Produce

Kelli Beckel, Senior Marketing Manager, Nielsen Perishables Group

Private label products have played a variety of roles within fresh food categories in recent years. From a necessary recession money-saver to premium product-of-choice, the role of a private label can be multi-faceted and appeal to a variety of consumers. Given its versatility, it’s no surprise private label sales are on the rise.

For produce, the private label offers retailers a vehicle to communicate product value that unbranded produce cannot, but at a lower price than nationally branded options. Recent trends show private labels’ presence in produce is growing, particularly in packaged products where private label serves as the value player. In such categories, private label growth is even surpassing total category growth.

To effectively leverage private label produce, it is important for retailers to understand the context in which this growth is occurring and why it is valuable.

A Growing Trend

The fresh departments, and especially produce, are unique because of the presence of “unbranded” products. Unbranded products bare no store or brand name, while private label items are branded with a store’s own label and compete with products that are branded with supplier labels.

Examining the entire store perimeter, private label accounted for one-fifth (19.9 percent) of total perishables dollar sales nationally during the 52-week period ending June 29, 2013. Private label’s contribution to total perishables sales is big and still growing, fueled by departments such as the bakery and deli (accounting for 42 and 30 percent of sales, respectively) where there are more opportunities due to the high volume of packaged products.

At the other end of the spectrum, due to the high volume of unbranded product in produce, private label accounted for just 10.9 percent of total produce department sales during the 52 weeks ending June 29, 2013. Unbranded products’ dominance within Produce reflects the challenge retailers face for branding (whether through a private label or owned brands) bulk, unpackaged product. However, unbranded share in produce has been stagnant over the past two years.  During the latest 52-week period, unbranded products’ share of total produce decreased 2.3 percentage points.

During the past year, private label produce sales growth not only surpassed unbranded, it outpaced total produce growth (up 13.7 percent compared to produce’s 7.6 percent increase). Private label also kept pace with branded growth, which was up 13 percent during this time.

Private label maintains a strong presence in staple categories including potatoes, onions, tomatoes and packaged salad. For certain heavily packaged produce categories, a private label not only maintained a respectable presence, it drove growth. Celery, lettuce, packaged salad, mushrooms and value-added vegetables posted solid share gains compared to the previous year. In fact, only seven of 44 produce categories monitored decreased share of private label sales during the past year. Apples, carrots, cooking greens, pineapples, stone fruit, and beverages were most notable among the seven categories.

The Value Proposition

The packaged salad is generally a higher-priced produce item, and the category is saturated with prominent national brands, creating a scenario that is ripe with opportunity for a lower-priced option. Branded packaged salads had an average 5 percent price premium over private label during the latest 52 weeks. As the lower-priced option, private label accounted for 40 percent of packaged salad sales (compared to the produce department average of 10.9 percent). Moreover, dollar sales of private label packaged salad increased 19.8 percent, while total category sales increased just 8.4 percent in the past year. Other high-value categories with similar sales movement included lettuce and value-added fruit, for which private label product accounted for 16.6 percent and 11.2 percent of category sales, respectively. In both cases, private label growth outpaced category growth.

Packaged salad exemplifies a category with a highly developed private label program, but an opportunity for retailer branding still exists for packaged produce varieties that do not have a well established private label presence. For example, private label has a small contribution to total berry sales at less than 1 percent; however, private label sales within berries are far surpassing total berry growth. During the latest 52-week period, dollar and volume sales of private label berries increased more than 25 percent, respectively. Focusing on categories where private label is less developed but is showing growth potential, like berries, can be advantageous for retailers looking to attract the value-focused consumer.