Sharon Nealson of McKinney, Texas, used to tote around a bottle of Fiji water to sip throughout the day, but after 7-Eleven introduced its private-label Skýra Icelandic spring water last year, she switched brands. “Fiji is great, but kind of pricey,” she said. “Skýra is not as expensive, but I wouldn’t buy it at any price if it weren’t a high-quality product.”
When private-label food products first appeared on retailers’ shelves in the last century, they were aimed at budget-minded consumers and expected to be of lesser quality because of their discounted price. But that stereotype is a thing of the past. Today, private-label offerings have gone upscale, although prices typically remain lower than name-brand merchandise.
Interestingly, consumers have purchased more store brands during the COVID-19 pandemic. Whether they were stocking up or unable to locate the products they typically bought is uncertain, but shoppers caused private-label sales to jump 12% since March 1, 2020, compared with both January and February 2020, according to InMarket, a mobile platform and analytics company in Los Angeles. And the purchase of store brands soared 15% among shoppers with incomes of $100,000-plus during the period.
Research indicates many shoppers determine where they’ll shop based on the retailer’s private-label offerings. According to a 2020 consumer survey from the Food Marketing Institute (FMI) and IRI, 46% of consumers say store brands influence their store choice, up 11% over research three years earlier. In a survey by Kantar, a London consultancy, 66% of shoppers agreed with the statement, “If I like or trust a retailer, I generally assume their private-label products will be good.”
“In 2008, private-label sales went through the roof because the economy tanked,” said Todd Maute, a partner at CBX, a New York City-based brand strategy and design agency. But even during the booming pre-pandemic economy, products were moving, “with private label up 5.8% in 2018, while national brands were up 1.5% on a national level. In units, private label was up 3.8%, and national brands down 0.02%.”
As the U.S. economy attempts a turnaround, it’s likely private-label sales will keep climbing.
Private Label in C-Stores
Private-label products from giants like Costco, Kroger, Trader Joe’s, Wegmans and Whole Foods are well known, but several convenience operators also offer signature items.
Irving, Texas-based 7-Eleven has been the convenience store leader in introducing and promoting private-label merchandise and now offers more than 1,500 different items. The program has been such a hit that the company’s sales of its private-label merchandise topped $1 billion last year.
There are three main categories of private-label products: personal care, supplements and food, and 7-Eleven has offerings in all of them. In 2008, the chain introduced the 7-Select brand with 87 items, primarily foods and beverages, and later added health and beauty merchandise. In the past two years, 7-Eleven introduced energy and sports drinks, Icelandic spring waters, organic milk and cold-pressed juices. The company also rolled out the 24/7 Life brand featuring merchandise people commonly use, including batteries, paper goods, cleaning supplies, travel-size toiletries, wine accessories and over-the-counter medications. Electronic devices, such as chargers, cables, speakers, screen-cleaning products and more, also are available.
In 2019, three 7-Select products received “Salute to Excellence” awards from the Private Label Manufacturers Association. Winners included a gourmet snack trio of salami, cheese and olives; vanilla and raspberry French macaroons; and Fresa Paleta, a frozen bar made of strawberry fruit and cream.
“The diversity of our products that received awards shows that our customers can expect the very best whenever they see the 7-Select brand,” said a company spokesperson.
Casey’s General Stores, based in Ankeny, Iowa, added more than 100 new private-label, high-quality snack and beverage products to store shelves in January, including chips, jerky and nuts, to round out established offerings like bottled water, packaged bakery items and packaged beverages.
“The expansion of our private brand is a testament to the expectations our guests have long held for Casey’s,” said Tom Brennan, chief merchandising officer, Casey’s. “Convenient, delicious food and drinks have been and continue to be central to our overall proposition, and the new private-brand selections bring this to life, whether in-store or online.”
Yesway, now based in Fort Worth, Texas, entered the private-label arena in 2018 with a selection of branded waters—spring, purified and enhanced—in several package sizes and designs. “The bottled water became the top two SKUs within the category weeks after launch, and now four of the SKUs are in our top five,” said Derek Gaskins, chief marketing officer, Yesway. “Since then, we’ve aggressively grown the portfolio.”
The chain has added Yesway chips, bagged candy, nuts, trail mix, donuts, Danishes, muffins and meat snacks (beef jerky, sticks and bags).
“Bagged chocolate candy and more impulse snacks are on the horizon,” he said, and the chain plans to move its private-label line into the 304 Allsup’s convenience stores in Texas, New Mexico and Oklahoma, which Yesway purchased in 2019. (Read more how Yesway integrated Allsup’s following the acquisition in “Leave the Tech, Take the Burrito” in the November 2020 issue of NACS Magazine.)
Obviously, a large chain has more opportunities to develop, market and sell private-brand products, but smaller retailers have also developed winning programs. Since 2014, the 16-store Busy Bee chain based in Madison, Florida, has sold private-label gourmet foods and gifts, including jellies, sauces, popcorn, seasonings and dips, available both in-store and online.
“We started with a few lines to see how customers would respond to them, and we’ve grown from there,” said Megan Forcey, director of advertising and e-commerce, Busy Bee. “Once our guests started asking us for a website so they could order products when they got home from traveling, we knew it was a success.”
Busy Bee is always looking for new items to enhance the offering. “There are so many wonderful vendors out there with terrific new products, and that is something we must stay on top of,” Forcey said. As for the No. 1 performer, “it’s difficult to say. The success of some products will depend on the surrounding area and what events might be happening. If we have an event where everyone is camping in the area, the popcorn line does really well,” she added.
Slovacek’s, a West, Texas, travel center on Interstate 35 between Dallas and Austin, sells private-label jams, jellies, pickles, quail eggs, sauces, Southern chowchow, salsas, relishes, marmalades, peanut butter spread, pickled vegetables, pumpkin butter and spiced peaches, which are sourced from a Midwest food manufacturer.
“Maybe 30% are purchased for gifts, and the rest are purchased for the customer’s own use,” said Ray Rabroker, general manager. “There’s some really good stuff, and it gives people a reason to come by.”
Early private-brand products were considered generic offerings, typically packaged in an unadorned can with a simple white label identifying “peas” or “carrots.”
“Private label was a way for retailers to make higher margins, and the products were 25-30% cheaper than the national brand,” said Maute. “As the quality of manufacturing improved, there became more options. Today, the quality may be significantly better [than national brands], and retailers are making so much more money on private label than national brands.”
Another positive benefit is that private-brand products help distinguish one retailer from another.
“Your customers can get a bottle of Coke anywhere. So, having Coke isn’t really a differentiator anymore,” Maute said. “But having a unique brand they can only get at your store will keep them loyal to you. Nielsen research has proven year over year that retailers with a higher private-label penetration have high store loyalty. And loyalty is even more important today when Gen X and millennial shoppers are value and price conscious and less brand loyal.”