A new survey by FMI—The Food Industry Association—revealed that more than 90% of supermarkets and food manufacturers plan to increase their investments in private brands over the next two years.
The Power of Private Brands 2024: Industry Strategies to Sustain Momentum report recently surveyed 42 food industry executives about the importance of this segment to their business and the strategies they plan to follow to drive product development and increase private brand sales.
“The private brands industry is thriving, and it’s clear why: its value is often unmatched. The sector has become a critical growth and investment area for retailers and manufacturers,” said FMI Vice President of Industry Relations Doug Baker. “To meet increasing demand, executives are investing substantially in developing new products and appealing to a broader customer demographic — especially younger shoppers. They are also strengthening their supplier and trade partnerships to drive innovation and sustain the ongoing success of private brands in food retail.”
Private Brand Investment Set to Increase
According to the FMI, 84% of food retailers and manufacturers surveyed say private brands are essential to their organizations. That, combined with its growing popularity among shoppers, has resulted in 93% saying they plan to moderately or significantly increase investments in this segment in the next two years, up from 82% a year ago.
Key investment areas include adding capacity and value through innovation and new product development in growth opportunities like premium, best value, health and well-being, products with simple/clean ingredients, and frozen and fresh foods.
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Private Brands Deliver on Value and Price
Per FMI’s consumer research, price (71%) and good value (72%) are the top reasons shoppers cite for purchasing more private brand items, and 80% of food industry respondents believe these remain effective in driving growth in customer purchases by offering value.
However, more than half (54%) of retailers emphasize the value of private brands beyond price, focusing on other areas that motivate consumers’ purchases of these products, including quality, taste, and meeting meal solution needs.
Younger Consumers Key to Segment Growth
Eighty-one percent of food industry executives said that appealing to younger consumers is the top area of importance, along with emphasizing value/price, to driving private brand growth.
An increased focus on digital marketing was the top strategy cited by both food retailers (69%) and manufacturers (52%) to attract younger consumers from digital-native generations.
Additional strategies cited by retailers and manufacturers through improved search functionality, suggestive selling, and more compelling online product images were:
- Increased use of samples (33%).
- Leveraging shopper insights (30%).
- Boosting convenience (25%).
- Enhancing ecommerce experiences (20%).