The Hot List: May 2012
PLBuyer’s 2012 Food Hot List, which includes food and beverage categories that saw dollar sales across food, drug and mass merchandise outlets (excluding Walmart) increase at least 10 percent during the 52 weeks ended Feb. 19, 2012, includes 70 categories. The chart on p. 27 shows a sampling of the categories on this year's Food Hot List. For the complete list, visit www.privatelabelbuyer.com.
The reasons why these categories saw such growth last year vary, but first and foremost it’s because of overall food price inflation, according to Ben Ball, senior vice president of Deerfield, Ill.-based Dechert-Hampe.
“While coffee was a big hit, look at the big categories that get thrown into private label like uncooked meats with 17 percent dollar growth on slightly lower units,” he says. “In general, food prices are up—including private label prices—which causes consumers to trade down to lower priced alternatives (like the now more expensive than last year, but still less expensive in the absolute than branded products, private label products) and voila, you have big growth.”
Convenience food once again seems to be a popular item on the hot list. Items such as frozen handheld breakfast, frozen handheld entrees and fruit rolls, bars and snacks, popped up repeatedly throughout the list.
Private label coffee seems to represent a big opportunity for retailers as there were quite a few coffee related items on the list this year, such as ground coffee, coffee creamer and ground decaffeinated coffee.
The innovation that has happened in the coffee category, combined with the value proposition, are conspiring to make grocery coffee purchases enticing for shoppers, according to Carol Spieckerman, president of newmarketbuilders, a Bentonville, Ark.-based marketing firm.
“One reason there’s been such an explosion of variety in the coffee category is because there are so many different kinds of coffee drinkers. Those who are quality freaks will never trade down, regardless of price fluctuations, while those who think ‘coffee is coffee’ will always flock to the lowest price option.”
Today’s challenging economic environment is encouraging shoppers to trade to other, less expensive coffee options, adds Jon Hauptman, partner at Barrington, Ill.-based consulting firm Willard Bishop.
“Some are trading from purchasing coffee at coffee shops to brewing it themselves at home,” he says. “Others are trading down from brewing branded at home to brewing less expensive private label varieties at home. As coffee prices decrease, I don’t expect shopper purchases to rebound to what they were before the recession and before recent coffee price increases. Instead, it’s highly likely that consumer purchase behavior is fundamentally changing. As consumers try new private label options—such as those in the coffee category—many will find that these items are quite acceptable and they’ll continue to buy them. Shoppers drive personal satisfaction from being smart shoppers and finding new ways to save money. I think the market is wide open for continued growth in private label coffee.”
Another category that years ago was barely a blip on the radar and now has seen tremendous growth is private label spirits.
When Trader Joe’s introduced Charles Shaw wine (better known as Two Buck Chuck) at $1.99 a bottle, retailers woke up to the possibilities of proprietary or private brand wine and spirits, says Spieckerman.
“Spirits are yet another category that has transitioned away from being a name-brand-only game and private label spirits are now a global phenomenon,” she said. “As difficult as it can be to discern private brands from national brands in various categories these days, I see the comparison being even more difficult in sprits thanks to clever naming and packaging across the category. As a result, some shoppers see only the price difference and load up on private brands.”
Hauptman said those similarities would benefit retailers.
“Private label spirits are a great opportunity area for retailers, because as consumers look for value across the store, they have found private label products to be agreeable options to which they can trade to stretch their shopping budgets,” he said. “This is particularly true in categories with relatively high prices per ounce for branded goods such as spirits.”
A NUMBERS GAME
Looking at the list as a whole, private label food categories had total dollar sales of roughly $11.2 billion. Total unit sales reached roughly 4.2 billion.
Quite a few of the overall categories fell out of the 2011 Hot List for foods, including frozen side dishes, fresh cut salad, frozen fish and seafood, sunflower/pumpkin seeds, crackers with fillings and frozen shrimp.
The only category that repeated in the Top 10 from 2011 was refrigerated uncooked meats (no poultry).
Consumers appetite for convenience once again was apparent when the categories are ranked by which had the largest percentage gain in unit sales for 2011.
Energy shots top that list, with frozen handheld entrees and frozen handheld breakfast not far behind.
In terms of unit sales, natural shredded cheese leads the list with 572.5 units sold at an average price of $2.78, 27 cents higher than in 2010.
Spirits are the most expensive item per unit in the Hot List this year, averaging $9.27 a unit. Unit sales in this category rose 37.64 percent last year. Refrigerated pizza/pizza kits came in second, in terms of unit cost, at an average of $6.38 each.
Items with the lowest average unit costs were dry macaroni & cheese mixes at an average of $0.92 a unit, baby food/snacks at an average of $0.93 a unit and cake/cupcake/pie mixes at an average of $1.16 each.
In dollar sales terms, natural shredded cheese is the biggest category with sales of $1.6 billion last year, up 11.6 percent from 2010 on unit sales of 573 million, up 0.89 percent from 2010.
LOOKING TO THE FUTURE
What will the food list look like next year?
Don’t expect to see convenience foods slowing down at all, particularly as restaurants either raise prices or shift portions away from premium offerings and toward lower-cost filler, predicts Spieckerman.
“Weather is often mentioned as a factor in non-food categories such as apparel, but if the warming trend across the country continues, it will beg for new food strategies as well,” she said.
Expect some of the commodity categories to continue to gain market share as well, says Paula Rosenblum, managing partner at Miami-based Retail Systems Research (RSR Research).
“I just think there’s a lot of room for improvements in commodities that are essentially the same regardless of brand, such as flour and sour cream,” she says.