Private Label Buyer

Making Over the Most Important Meal of the Day

May 13, 2011

The new consumer, more frugal than American shoppers of the past, is increasingly turning to private label breakfast foods when eating that first meal of the day at home.

“As the economy continues its slow upward march, consumers remain quite conservative,” says Susan Viamari, editor of the monthly Times & Trends at research firm SymphonyIRI Group, Chicago. “And many are telling us that they will continue to embrace the money-saving strategies they have been using even after the economy fully recovers.”

More than one in three consumers actively seeks out store brand breakfast foods today, SymphonyIRI research finds.

Frozen breakfast food dollar sales rose 5.02 percent to $1.6 billion in the 52 weeks ended Feb. 20, 2011, when compared to sales for the prior 52-week period; sales of private-label handheld options rose more than 35 percent in the 52 weeks ended Feb. 20, 2011, to just shy of $14 million.

And while refrigerated breakfast foods are losing some of their luster - down nearly 8 percent in sales the past year - what interest remains is for private label offerings. In 2011, private label showed an approximately 6 percent gain in dollar sales in refrigerated breakfast options.

When consumers opt for at-home breakfast foods, they increasingly are looking for what they consider healthy options.

Seventy-one percent of consumers are looking to eat healthier these days, according to a January 2011 SymphonyIRI report.

  “The new trend is toward health-conscious products,” says David Kakan, sales manager at Bubbles Baking Co., Van Nuys, Calif. Bubbles Baking makes a range of products that include pancakes and pastries.

So interested is the public in all-natural products that are low in calories and fat, they are willing to give up something in taste to get a health benefit, he says.

Don Stuart, chief operations officer at Kantar Retail, Weston, Conn., acknowledges that consumers aren’t going to starve themselves of flavor just to avoid a few grams of fat or another 100 calories.

“We are seeing a perpetuation of apparent contradictions,” he says. Flavor is important, as are smaller portions, fiber content and vitamins.

The drive toward better-for-you coincides with consumers’ commitment to smarter breakfast buys.
As Kakan’s company strives to formulate recipes that take care of folks’ hearts while tickling their taste buds, it keeps in mind two growing private-label product lines - premium and value breakfast foods.
“We have had an increase in value items, an increase in our business from both client and consumer demand,” he says.

New product development straddles the traditional private-label space - grocery, c-stores and mass merchandisers - and the emerging value retail alternative.

“Walmart and Target are losing to value stores, which used to focus on non-grocery,” Kakan says. “Now they have grocery sections. They started with canned goods, added frozen and now are adding produce. The consumer walks in and does all of her shopping.”

Bubbles Baking is developing health-conscious breakfast foods for dollar stores and traditional clients. To keep the price point down for value store offerings, portion sizes are smaller and packages have fewer servings inside.

The subcategory that saw the largest private label sales growth in the most recent 52-week period is other frozen breakfast items where PL sales shot up more than 2,100 percent to more than $296,000.
“Breakfast is competing aggressively for away-from-home occasions. More and more focus is on grab-and-go and convenience,” says Kantar’s Stuart. “The quick-serve restaurants have really developed this trend, and it is now up to the grocery stores and manufacturers to better satisfy their needs.”

Sales of frozen and refrigerated breakfast entrées and sandwiches decelerated from 2007 to 2009, according to Mintel International Group research. The recession pushed consumers to make breakfast from scratch to save money.

The category will decelerate slightly until 2015. Mintel expects a compound annual growth rate of 6.1 percent in refrigerated and frozen breakfast foods from 2010 to 2015, with category sales exceeding $1 billion for the first time in 2014.

Commodity prices will rise 2 percent to 3 percent in 2011, according to the U.S. Department of Agriculture, with some categories seeing much higher levels of inflation.

“Manufacturers will have a multi-pronged attack to address: increasing value, decreasing size, increasing prices and increasing promotional efforts,” Stuart says.

“While these can be working at odds, it is the sweet spot or balance that manufacturers will be seeking to convey the proper value message to consumers.”

The possibility of achieving this sweet spot is accentuated by the trends Kakan points to: consumer interest in better-for-you breakfasts, acceptance of smaller portion sizes, fewer servings to a package, stable or same-as-national-brand pricing, and increased value through wider distribution, better ingredients and enhanced health benefits.

“Private-label breakfast foods are benefitting from a broader surge in private label that brought it to a new high last year,” Stuart of Kantar Retail says. “Consumers recognize value especially in difficult economic times.”

“Manufacturers have been offering great prices for private label. Now they are actually offering much better quality so that the overall value equation is spot-on,” he adds.

Upping the quality while watching the price does not secure sales in a space in which fast-food chains and national brands compete with vigor, however.

Brand-name manufacturers are pricing their products more aggressively and promoting heavily, across media.

On the private-label side, though, nearly two-thirds of categories receive below-average levels of merchandising support, Viamari says.

“This is an opportunity lost for private-label marketers. This is a time when retailers and private-label manufacturers should be prominently showcasing their products across promotional platforms, and it is just not happening to the level that it should.”