Private label food trends for 2011

Private label leaders returned from the recent PLMA conference in Chicago with lots of information to digest and new ideas on how to drive growth in 2011. PLMA regularly holds a conference in Chicago in November in which suppliers and retailers get together to show their wares and discuss new ideas and products. Attendance was up +15%, according to a PLMA spokesperson, despite a year that was average at best for private label growth.

After growing strongly in 2008 and 2009, sales of private label foods are flat in 2010 as brands counterattacked and increased trade and consumer promotion. Despite this, private label leaders are optimistic that private label brands will return to gaining share. The leading private label companies Treehouse (THS) and Ralcorp (RAH) were well represented, as were many of the key supermarket retailers like Target (TGT), Kroger (KR), Super Valu (SVU) and Safeway (SWY).

Several key trends appear to be emerging or continuing based on our conversations with private label retail and manufacturing leaders:

  • Products continue becoming more upscale both in price and quality. While much of the current sales are in the "extreme value"or mid tier (brand competitive segments), much of the interest in new products was aimed at creating premium quality private labels that are differentiated from brands. Think of a return to "natural"and / or "organic", along with higher quality products aimed at more affluent consumers.
  • Upscale and differentiated packaging was also discussed with many vendors. This also fits with the more upscale private label products as retailers need the packaging to convey the better quality. Gone are basic metal cans while upscale plastic containers are more on trend.
  • Continued rise of pricing to offset commodity price increases. Most private label vendors, especially those with exposure to grains, need to push through price increases to maintain margins.
  • Expansion of SKUs into somewhat related product categories. Treehouse's Sturm division has announced new single serve coffee packages will be available in Walmart. These items are a direct attack on Green Mountains (GMCR) succesful k-cup franchise. Were also hearing about new private label products in categories that before now did not have a strong or any presence.

All in all, expect private label products to continue their assault on branded items. We expect the focus to cater to the improving economy and attempts to gain traction with mid and higher income consumers.

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