Despite the U.S. economy growing at a strong 3.5% annual growth rate in the third quarter, 49% of consumers are making sacrifices to make ends meet, according to recently released IRI Consumer Connect survey results. Consumers are continuing to rely on private label products to stretch their dollars. In fact, the IRI Private Label 2018 report reveals that eight in 10 Americans buy private label products frequently or occasionally in order to save money.
Private label products are quite popular with younger consumers, who tend to be driven more by product benefits than by brand name. Ninety-two percent of Millennials are turning to private label products to save money, compared to 86% of Generation Xers, 81% of baby boomers, and 77% of seniors.
“The increased likelihood of younger consumers turning to private labels really bodes well for the retail brand sector of the industry,” says Susan Viamari, VP of thought leadership for IRI. “It’s truly a testament to the success private label innovators have had in bringing to market the solutions that fulfill high-demand shoppers’ needs and wants.”
The struggle is real for Millennials
The latest IRI Consumer Connect Index further highlights Millennials’ financial stress. The Index, which monitors consumers’ financial health and CPG behaviors for factors such as brand loyalty, attitudes toward organic/natural foods and beverages, perception of national compared to store brands, and frequency of using retailers’ and manufacturers’ coupons, came in at 97.6 for Q3 2018 for all consumers. This is up slightly compared to Q3 2017 (96.8). However, the current index for Millennials is noticeably lower at 94.5 compared to 94.7 in Q3 2017. With a benchmark score of 100, a Consumer Connect Index score of more than 100 reflects consumers who are less price-driven, more loyal to favorite brands, and better equipped to maintain their desired lifestyles without changes.
In addition, it is still hard for many to buy groceries, with 33% of all consumers having difficulties, compared to 38% of Millennials, 42% of Gen Xers, 34% of baby boomers, and 19% of seniors.
Private labels are enticing
Consumers continue to embrace private label products even though the economy has stabilized. Sixty-nine percent say private label quality is as good as national brands, and 68% say private labels offer better value than national brands. Millennials, in particular, have very favorable views of private labels, with 76% saying the quality is as good, and 73% saying the value is better.
These viewpoints are making a positive impact on private label dollar sales, which increased 5.8% compared to 1.5% for national brands during the past year. In addition, private label unit sales increased 3.8% compared to national brand unit sales decreases of 0.2% during the past year.
And it doesn’t stop at quality and value; consumers are selecting which stores they will shop in based heavily on the assortment of private label products offered. The criteria include:
Performance by channel
There are still plenty of untapped opportunities for retail channels. During the last year, grocery private label performance has underperformed compared to the industry average, with dollar sales growth of 1.2% and unit sales declines of 1.7%. Within grocery, though, some retailers are showing momentum, such as Fred Meyer and Jewel Osco.
Club stores are outperforming grocery and all competing channels. This is driven by increases in private label trips and basket size:
Consumers are hungry for more
The future looks bright for private label, with two-thirds of consumers planning to buy more private label products in the coming six months. This is more prevalent among younger shoppers: Millennials 73%; Gen Xers 71%; Boomers 63%; Seniors 54%.
“Private brands are not all about price,” adds Viamari. “They are evolving with innovation and offer the quality, packaging, and assortment that shoppers are seeking. Consumers are looking for more choices, and those retailers and manufacturers who are adjusting their strategy to meet those needs will see greater success.”