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Grocers Turn To Private Labels To Drive Sales, Boost Margins

In 2020, private label sales hit a record high, accounting for almost a quarter of all products sold during the year, hitting an all-time high of $27.3 billion, said the industry trade group Private Label Manufacturers Association.

The segment added $8.5 billion over the year, according to Progressive Grocer. Additionally, data shows that growth outpaced name brand sales growth for the fourth consecutive year. Consumers are opting for private label options where possible and retailers are taking note.

Digitally-native convenience store Foxtrot Market recently brought on Mitch Madoff, who worked as a senior executive on Whole Foods Market’s exclusive brands for eight years, as senior vice president of private label and supply chain. As Madoff told PYMNTS in a recent interview, “When I was at Whole Foods … it was a large company, and so we might not have been as nimble or as quick to jump on trends or lead trends. Actually, here at Foxtrot I’m finding it to be the opposite — we’re able to move super fast [and to] create the trends in a lot of areas…We’re really out leading, more tip of the spear.”

Of course, Foxtrot is far from the only retailer vying to become a leader in the private label space. As grocery giant Kroger shared on a call with analysts in March, its brands hit record high sales during 2020.

“Our brands is a pathway to deepen and widen our competitive moats. It’s a $26 billion business that differentiates Kroger across the entire store and all modalities,” the company’s chairman and CEO Rodney McMullen said during the Kroger 2021 Virtual Investor Conference presentation. “Simple Truth alone hit $3 billion in sales last year. If the Simple Truth brand was a CPG, it would be the second largest brand in our stores. Our brands is our not so secret weapon that we intend to scale and leverage with even greater focus.”

In the same presentation, McMullen shared that if the company’s private-label offerings were a standalone company, they would “rank eighth on the Fortune 500 listing of CPGs.”

As Kroger touts the success of its offerings, others are announcing their major additions. Retailers from Amazon to Target have been rolling out new private label grocery brands.

As Target’s Chief Growth Officer Christina Hennington said on a call with analysts in March, “Our own brand portfolio, which spans all categories, is vital to the success of our business. It represents about one-third of our total sales and even more of our gross margin, which helps to sustain key enterprise investments.”

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