Traditional Grocery Stores Lose Private Label Share to Specialty Retailers

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August 3, 2010

Specialty food retailers, such as Trader Joe’s and Whole Foods, enjoyed greater growth in store brand sales between 2005 and 2009 than traditional supermarkets, according to “Private Label Food and Beverage in the U.S,” a market research report published by Packaged Facts.

Growth among traditional food and beverage retailers was modest at a compound annual growth rate (CAGR) of 4 percent between 2005 and 2009. Meanwhile growth in specialty food stores Whole Foods and Trader Joe’s, which grew at a CAGR of 14 percent during the same period, according to Packaged Facts.

Supercenter stores such as Walmart and Target also realized high private label growth at a CAGR of 9 percent. Club stores, such as BJ’s Wholesale, Costco, and Sam’s Club grew slightly better than the mean at a CAGR of 6 percent.

At the low end, discount supermarkets, including Supervalu, Aldi, and Dollar General saw food and beverage sales actually decline in 2009 from 2008 levels, according to Packaged Facts. Still the group managed to eke out a small five-year gain growing at a CAGR of 2 percent.

“Private-label food and beverage have eclipsed their ignoble past of no name and generic products with the development of new flavor varieties, enhanced product packaging and different pack sizes, and the emergence of premium lines,” said Don Montuori, publisher of Packaged Facts. “Plus private labels entered into new territory where the additional power of the retailer name and its inherent benefits are aiding private labels to emerge as brand names. Store reputation alone may be the driving force in the success of chains such as Trader Joe's and Whole Food Markets in attracting more affluent consumers to the category.”

Private label food and beverage dollar sales totaled $87 billion in 2009, accounting for 17 percent of total food and beverage retail sales in the United States, increasing 6 percent over 2008 sales of $82 billion, according to Packaged Facts figures. Gains were mostly driven by a 7 percent increase in the food market, while beverage sales rose only 1 percent, according to the report.

Private label’s penetration rate was at 14 percent of total food and beverage retail sales in the beginning of the 2005–2009 period, but began to rise in 2007 as the economy showed signs of slowing. Hitting 15 percent in 2007 set the stage for a jump in 2008 as the penetration rate grew to 16 percent, according to the report.

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