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Private label ramps up

The pandemic has accelerated a trend toward store brand innovation that was already well underway
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Private label is experiencing a new lease on life, with grocers revamping their store brands and launching innovative new products. And the timing is opportune, as the coronavirus pandemic has pushed more cash-conscious consumers toward private label, accelerating a trend that was already underway, experts say.

"The economics for private labelling are getting better and better, mostly as a result of COVID,” says Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University. Consumers are looking for bargains, but these are increasingly hard to come by, particularly during the pandemic. This, he says, is leading to increased interest among grocers to design and control their own brands and sell product at reasonable prices.

According to Nielsen, COVID-19 has increased private label’s share of market. During the first wave of the pandemic, from March 1 to July 11, 2020, private label’s market share grew to 18.2% compared with 17.2% in 2019. As COVID-19 tightens consumers’ spending and the economy falters, consumers will continue to increase their private-label purchases, says Aslam Ghori, vice-president of client service at Nielsen. “Economic recessions are a big driver of private-label growth as shoppers need to make cost savings.” Post-pandemic, he expects these consumers will maintain their habit of seeking and expecting better value.

Interestingly, Nielsen research shows many consumers now see private-label brands as being equivalent in quality to national brands. Furthermore, consumers are willing to spend more for premium private-label products, primarily “when the product boasts a point of differentiation,” Ghori says. “The value for money continuum, from premium through to budget private label, is being stretched and retailers are innovating quickly to meet shopper expectations.”

Jenny Longo, director, private brands at Longo’s, agrees. Consumers are definitely more open to trying a store brand product right now, she says. “I feel private label will continue to grow and flourish as store brands really allow an opportunity to differentiate and offer fresh and unique products.”

Longo’s is revamping its entire private-label portfolio, with the introduction of three new tiers, new packaging and several new products, many of which are sourced from family-run companies. “We take great pride in our private brand products and only put our name on products we would serve our own family,” Longo says.

Charlebois says Loblaw’s President Choice has long been a benchmark for private label in Canada, with a strategy that has been “impeccable.” Given that the address of Loblaw’s Brampton, Ont. head office is 1 President’s Choice Circle, “you can tell that they live and breathe for that brand,” he says. “It’s a super-important component of their business, whereas for other grocers I don’t think it is yet. But it’s coming. The pandemic has accelerated that process.”

Sobeys is another grocer that Charlebois says has recently been “getting its act together around private labelling” with its Compliments brand. The grocer has been revamping its Compliments brand after finding there was “a significant opportunity” to improve its assortment, according to Seanna Rishor, vice-president of private label at Sobeys. Compliments has expanded into new categories such as Greek yogurt, organic baby food, plant-based dips, family-size bathroom tissue and paper towels, goat cheese and coffee with single-serve K-Cups.

A survey conducted for Sobeys by Harris/Decima that was released in July found 83% of Canadian grocery shoppers buy private-label brands and 49% do so frequently. And with shoppers cooking from scratch again, so-called “COVID categories” have seen a marked uptick in sales, Rishor says, adding that “consumers are really gravitating towards frozen and we’ve seen a resurgence in centre of store” private-label sales.

Ken Keelor, CEO of Calgary Co-op, hopes its new private-label brand will soon be a household name in the Calgary area. In April, the 23-store retailer launched its new private-label program after its distribution and private-label deal ended with Federated Co-operatives Limited (FCL). Calgary Co-op’s curated Cal & Gary’s store brand aims to represent Calgary, while its Founders & Farmers brand is a national brand equivalent for everyday needs and value.

The goal of Cal & Gary’s is to combine quality and a distinctive personality and create an emotional connection with Calgarians, Keelor says. “It would be so easy for us to just create a line of me-too items, but we wanted to do something a bit different.”

Each Cal & Gary’s product contains a “Calgaryism”—a “fun but meaningful” tag line that will resonate with Calgarians, says Chris Gruber, senior director of private brands at Calgary Co-op. For Cal & Gary’s Organic eggs, the “ism” is “Ready to crack, like your windshield,” for example. “If you’re from Calgary, you will fully appreciate what that means,” she says. The Calgaryisms also aim to cheer up people who are going through tough times, adds Keelor. “It’s a great time to bring a little smile or connect with someone’s heart, and not just their wallet or their purse.”

Although Calgary Co-op now has fewer private-label offerings than when it was with FCL, Gruber says there were “unproductive products” in the mix before. “The right number for us is less around the number and more around what the consumers are looking for.”

Gruber says both of Calgary Co-op’s new brands are “in ramp-up mode” and are expected to take about two years to reach the market average for private-label sales. “This brand is going to take years to build,” Keelor says. “Brands are not built overnight.” While most grocers have had their own private labels for years, the goal is to convert those private labels into true brands, Gruber explains. “This is really where the retailer is going to win and build confidence with consumers.”

To boost its own private-label mix, Saskatoon-based Federated Co-operatives is focusing on “unique and different offerings” for its Co-op Gold Pure brand, many of which are sourced from the Prairies. There is significant potential in product innovation because “your margins are a lot higher,” says Sav Bellissimo, store brands manager at FCL. “There’s not a lot of competition to drag the prices down.”

In October, FCL teamed up with Indigenous groups in northern Saskatchewan to launch two blends of loose leaf teas: Co-op Gold Pure Restoration (containing fermented fireweed and wild mint) and Relaxation (a mix of nettle, goldenrod and Labrador tea). It’s also buying fish from Indigenous communities in Manitoba and Saskatchewan for its Co-op Gold Pure Northern Pike, Walleye and Lake Trout brands. “Those are all products that we’re proud of and hopefully have a halo effect,” Bellissimo says.

FCL recently took the jam category, “which was basically stagnant,” and introduced a homestyle Co-op Gold Pure line with five varieties of Western Canadian fruit, including Saskatoon berries. As a home for the jam, it’s launched the new Co-op Gold Croissant Loaf, which combines bread and croissants. FCL is now working on private-label projects ranging from oat milk to hemp.

As with any innovation, it can be good to take a few risks. Bellissimo notes that grocers who seek to be innovative in private label “are not going to hit it out of the ballpark every single time. You’re going to have to have a mentality that if you fail, it’s for the good of the category.”

This article appeared in Canadian Grocer‘s November 2020 issue.

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