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Private Label Products Hot List - Food

Snacks, meal replacements, sugar-free, coffee and convenience all factored into the top dollar sales gains for private label in 2013.

May 1, 2014
Trans

Nearly 100 private label product subcategories spanning dozens of IRI categories made the cut for the 2013 iteration of the PLBuyer Hot List of foods, comprised

Enlarged chart

Hot List chart May 2014

of subcategories that saw 10 percent or more dollar sales growth over the course of the year across supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains the 52 weeks ending December 29, 2013. The top gainers this past year? Snack bars and nutritional beverage mixes, sugar-free candy and confectionary, refrigerated ready-to-drink (RTD) and single-serve coffee, and convenience items like frozen cookie dough, frozen breakfast foods and speed-scratch pizza products.


Snacks on Track

Private label “all other” snack and/or granola bars, had a sales increase of 18,407 percent to hit the No. 1 spot on The Hot List this year. While total sales volume is still low, snacks are at the forefront of private label trends, and this category is likely to see continued growth in the coming year. It’s notable that granola bars didn’t make the Hot List, with sales down 3 percent—but they still made $163 million last year. This growth in the “all other” area perhaps indicates shopper desires for increased diversity in their snack options. Following the better-for-you trend, nutritional/intrinsic health value bars had the 25th highest sales of all categories on the Hot List, at almost $60 million and up 16 percent.

“Snacking has emerged as a major meal occasion in general, and everyone from grocers to fast-food restaurants is determined to participate in the opportunity,” said Carol Spieckerman, president of newmarketbuilders. “Better-for-you alternatives such as granola bars, yogurt and liquid meal options like smoothies are the next wave. In some cases, consumers are using snacks as meal replacements, which will only accelerate the trend.”

At No. 6 on the list—but dropping down from the top slot on the previous year’s Hot List—frost/whipped/yogurt drink mixes offer a new liquid meal option, while refrigerated milkshakes/non-dairy drinks came in at No. 16 on the list, with sales up 84 percent to $4 million. Refrigerated juice and drink smoothies hit No. 20.

“The top categories represent quite a diversity of options, which reinforces the need for retailers to offer broad assortments that appeal to a wide variety of tastes,” continued Spieckerman. “At the same time, retailers that address food sensitivities (dairy and nuts for example) and dietary preferences (vegetarian and vegan) will have an advantage over those that go for mass appeal only. Healthy bars, yogurts and snack foods can be quite expensive when they are incorporated into a daily routine. As the snacking trend goes mainstream, private brands will benefit by offering lower-cost alternatives.”


Pick Your Sugar-Free Spots

Sugar-free chocolate candy took the No. 2 spot on the list this year, up 3,669 percent.

“The rise in diabetes, not to mention the ongoing vilification of sugar on various doctor shows and online, continues to drive awareness and acceptance of sugar-free alternatives,” said Spieckerman. “The flavor profile upgrades that manufacturers have made to sugar-free alternatives—and the exploding options available in chewing gum, in particular—have driven the category in national brands. Now that they have paved the way, private brands are reaping the benefits.”

However, because of the many sugar-free pegs today owned by branded products, it’s easy for private label to get lost in the set, warned Vonnie Veldman, director of business development for First Source, LLC (formerly Wythe Will Tzetzo).

“Overall, whether it is chocolate or non-chocolate sugar-free, the sales threshold is much less for sugar-free than a traditionally sweetened product. With chocolate, in particular, consumers may be making choices to eat less of a particular treat instead of compromise their expectations with a similar item with a sugar-free attribute, even if the sugar-free chocolate is just as delicious as the regular treat.

“When making assumptions based on data, you need to rely on overall sales potential for a particular candy to determine if it should be given peg or shelf space in your set,” continued Veldman. “A 3000 percent increase in dollar sales sounds great until you look at what that means in dollars. I know of a private label customer who is carrying a traditional chocolate-covered almond, and merchandises it next to a sugar-free chocolate-covered almond. Sales on the sugar-free almond are 10 percent of what the traditional chocolate almond is selling at. While it is important to offer what consumers are wanting to buy, it needs to be weighed against how much product movement potential you may be missing based on making assortment decisions with this in mind.”

Sugarless gum came in at No. 10 on the Hot List, and breath freshener at No. 4. Sugar-free gum has become an important player in the front-end gum set relative to stick gum, but has not had the same level of success in the peg bag and laydown set, said Veldman. “Overall, sugar-free candy has a place within a set, but the movement, no matter what it is, does not warrant significant real estate when compared to the movement potential of a traditional sugar confection,” she said.

Sugar-free candy’s best selling space is within the regular candy set, Veldman suggested, with a label color differential that calls out “sugar free.” She advised against placing private label items in a specific sugar-free or better-for-you set, since the item would only be sought out by consumers shopping specifically for sugar-free or healthy products.

Further down the list at No. 19, the chocolate candy box/bag/bar less than 3.5 oz. category rose 53 percent to more than $11 million, making it the third highest selling category in the top 20 and the 43 highest selling category on the entire Hot List. Portion-controlled confectionary products—bite-sized indulgences—across the board have seen attention of late. Greater than 3.5 oz. options had the 16th highest sales on the Hot List at $123 million, yet have less than a one percent share.

Private label candy bar alternatives have had a lot of shelf placement recently, offering a value alternative for candy bar purchasers. Manufacturers who have the capability to produce chocolate bars, but don’t have the multimillion dollar marketing budget to compete with the national brands, have seized upon a growing niche, explained Veldman. In the size category of greater than 3.5 oz., the items are bagged candies for the most part, with private label program potential to hit retail price points that are attractive to shoppers.

“Consumers can get a great bagged chocolate item for $1.99–$2.99 that will typically have twice the weight of a similar item in a brand name bag,” said Veldman. “The products offered are mainstream favorites that have staying power, as well.”


Coffee Break

Not surprisingly, single-cup coffee made the top 10, coming in at No. 5 on the Hot List with sales at $182 million, up 664 percent. Sales were the 13th highest when looking at the overall list. But every category with higher sales had increases of less than 26 percent, showcasing exactly how much single-cup coffee is exploding onto the private label scene.

This trend will continue. One definitive case in point: The single-service private label coffee business at major player TreeHouse Foods alone reportedly generated $180 million in 2013, and analysts have predicted that number will grow to $250 million by 2015.

Private brands offer a lower-cost alternative for consumers who have already made an investment in Keurig machines, bringing price-sensitive competition into a premium, convenience-oriented segment. While more-sustainable single-cup coffee packaging, along with fair-trade and organic, offer fresh approaches, the single-cup trend has also expanded into other beverage options, such as tea, chai lattes, and hot chocolate.

“Starbucks and Keurig Green Mountain recently refined their agreement in a way that should bring even more variety to the branded K-cup category,” said Spieckerman, “and this will provide an expansion template that private brands can follow.”

Coffee is hot in other areas of the store, too—including the refrigerated case. Refrigerated RTD coffee came in at No. 3 with a 3,403 sales increase to almost $3.5 million.

“Private brand RTD coffee is a great example of how restaurant/café brands have infiltrated grocery and enlivened mature categories,” said Spieckerman. “As popular as energy drinks have become, RTD coffee offers a great alternative for coffee-lovers.”

According to Euromonitor’s July 2013 “RTD Coffee in the U.S.” report, the North American Coffee Partnership, a joint venture set up by Starbucks and PepsiCo, continues to hold a commanding lead in RTD coffee sales, with a 72 percent off-trade value share in 2012. RTD coffee sales are expected to continue growth. Off-trade value sales of RTD coffee are expected to grow by 27 percent between 2012 and 2017 to reach $1.9 billion.

Since many RTD coffee beverages contain protein and calcium, highlighting health values on the label and in marketing materials, along with offering low-calorie alternatives, might give competitively priced private label brands an edge. One example illustrating this approach is Starbucks Iced Coffee Coffee+Milk, which only has 50 calories, launched in April 2013.


The Speed-Scratch Wave

Private label frozen cookie dough hit No. 8, and frozen “other” breakfast foods came in at No. 9 on the Hot List. Other private label convenience foods followed—notably speed-scratch pizza products like pizza crusts or shells (No. 12), pizza kits or mixes (No. 13) and frozen pizza crusts and dough (No. 22).

Store brand pizza crusts and shells were notably up 106 percent to $6 million, but still with less than a 1 percent share. Frozen pizza crusts and dough were up 51 percent to almost $6 million.

Other top products on the Hot List with an angle on convenience include shelf-stable microwaveable package dinners (No. 17)—notably with the second-highest sales in the top 20, up 59 percent to more than $17 million.

“The momentum behind convenience foods shows no signs of letting up,” said Spieckerman. “Retailers have done a great job of providing higher quality and more diverse offerings to consumers. It wasn’t that long ago that ‘convenience’ meant Hot Pockets or frozen pizza. With the increased awareness and attention to dietary restrictions, allergies, preferences and just plain pickiness, make-your-own pizza is a perfect way for families to create meals that work for everyone. Incorporating customization elements to convenience offerings is a real growth opportunity for retailers.”

Sweet treats are also riding the speed-scratch wave. “Frozen cookie dough qualifies as a convenience food, yet one that parents can still say they are ‘making’ with their kids,” said Spieckerman. “This speaks to another usage occasion in the semi-homemade space—to position products as family cooking projects without the mess or preparation times associated with homemade.”


Bird Is the Word

The popularity of turkey is worth noting, as frozen and refrigerated turkey or turkey substitute had the 15th highest sales on the list ($166 million, up 33 percent). Processed frozen and refrigerated turkey and turkey substitute came in at No. 25 on the Hot List, with a sales increase of 44 percent to $30 million. These moves speak to health-and-wellness trends, bringing more turkey to registers throughout the year.

Turkey production continues to rise. According to USDA, turkey production in 2012 was over 7.5 billion lbs., up 4 percent from the 2011 production. This equated to a value of $5.4 billion, up 10 percent from $5.0 billion.  

“Turkey is a ‘bridge’ protein for people seeking to reduce red meat intake, and the diversity of turkey products available to consumers is increasing awareness and adoption of it as a dietary staple,” said Spieckerman.

But not all of this growth is due to poultry consumption, since IRI includes turkey substitute—or analogue—in its data. While only 7.3 million Americans consider themselves vegetarian according to a June 2013 Harris Interactive poll, that number grows to a notable 22.8 million for those who follow a “vegetarian-inclined diet.” This group of “semi-vegetarians,” or “flexitarians”—people who opt for vegetarian foods as part of their diet but also consume meat and poultry—greatly increases the market for private label vegetarian products. 


The Numbers

Looking at the list as a whole, private label foods with 10 percent or more dollar sales growth last year accounted for more than $10.5 billion, up from the 2013 Hot List, which saw total dollar sales hit roughly $9.3 billion. Notably, this year’s list featured 28 more IRI subcategories than last year.

However, total unit sales on the Hot List reached approximately $3.4 billion, down from the 2013 list where total unit sales reached roughly $4 billion. We can attribute this dollar sales increase in spite of unit sales decrease to more-aggressive pricing strategies employed by retailers of late.

Trend continuity is at play from the 2012 to the 2013 Hot List for foods. Two top-10 categories were repeated over the two years: frost/whipped/yogurt drink mixes (No. 1 on the 2013 list) and single cup coffee (No. 4 on the 2013 list).

Frozen fruit is particularly hot, with the biggest unit share on this year’s Hot List at 66 percent; this reflects a share increase of 13 percent over last year.

Egg substitutes and refrigerated uncooked meats (no poultry) have the next highest unit shares at 54 and 45 percent. Refrigerated uncooked meats (no poultry) also brought in the second highest dollar sales at approximately 1.6 billion, up almost 25 percent.

Only three categories on the list this year brought in sales in the billions. Convenience/PET still water had the highest sales of all at approximately $1.7 billion, while fresh-cut salad took the No. 3 spot at $1.56 billion. Cooking/baking nuts sales were notably up 25.6 percent to $280 million, putting it at No. 10 of the highest sales with almost 30 percent unit share.

 For the complete list of all 98 private label products that made this year’s Hot List, visit www.privatelabelbuyer.com/hotlist.  

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