Private Label Buyer
Category Insights: Dairy

Daring Private Label Dairy

High shares and new trends make the case for private label expansion in the dairy case.

January 2, 2014
Category insights: dairy

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"In the private label world, dairy has always been the leader,” said Alan Hiebert, senior education coordinator for the International Dairy-Deli-Bakery Association (IDDBA).

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Category insights: dairy, chart

The reason? The relatively short shelf life of most products in the dairy case has created a category comprised of many regional products, which tend to be private label or exclusive products. This also allows for retailers to tackle the consumer demand for locally sourced, “transparent” items most easily in the dairy aisle, leading to a lot of conversation and press around dairy.

Lowfat, skim and whole milk remain the undisputed private label leader in the aisle, collectively accounting for 54.35 percent of milk sales per SymphonyIRI data for the 52 weeks ending November 3, 2013.

“Buying private label dairy products shows trust that a store is keeping things in the dairy case clean, fresh and safe—especially since kids are such big consumers of many dairy case products,” said Hiebert.

Most consumers are loading their carts with private label dairy products such as milk and cheese on a regular basis, according to a study of 6,600 consumers conducted by Market Force Information released in August 2013. More than three-quarters (76 percent) of respondents said they purchase private label dairy products most or some of the time, 19 percent said always and only 5 percent said never.

Price appears the main motivator. Of the 95 percent who buy private label dairy somewhat regularly, 78 percent said it is because of the price and 48 percent pointed to the good value, according to the study. What’s more, brand awareness is fairly high in this category. When asked if their primary grocer carries private label dairy products, 80 percent of consumers said yes, followed by 12 percent who did not know and 8 percent who said no.

While most retailers offer private label milk, yogurt and eggs—the top-selling private label dairy products—retailers looking to expand will want to add products that help consumers prepare meals for their families quickly, according to Hiebert.

The dairy case meal-starters category is fairly small, with relatively small private label penetration, but the refrigerated dough category accounts for about $1.4 billion in sales with almost a fifth coming from private label products, according to the IDDBA’s “What’s in Store 2014” trends report.

However, retailers need to exercise caution when adding new products, warned Hiebert. “If adding a new product means taking away another one, it could mean making customers unhappy,” he said. “And when customers leave the store without what they came in for, there’s always a chance they’ll never come back.”

Hiebert also noted that adding too many new products can be overwhelming. “Many of the 12,000 to 13,000 new dairy products tend to be line extensions—new flavors of existing products, or perhaps a new functional additive in an existing product,” he said.

Farm to Aisle

As the topic of transparency heats up, the dairy aisle, already awash with regional products, is at the height of this discussion.

“These days, there is no excuse for lack of transparency,” said Hiebert. “With the information available to just about anyone at just about any time, consumers will find out what they want to about the products they buy. Lack of transparency can lead to a negative online firestorm. In the case of private label, that means the reputation of the store itself is on the line. In short, labeling and signage should reflect exactly what is in the product.”

More often these days, that includes GMOs and other agricultural details. “Consumers are increasingly interested in GMOs currently,” said Hiebert. “Though the FDA has determined that there is no significant difference between GMO and non-GMO products, At least one major chain has risked relationships with some of its vendors by banning GMO products in its stores. In the dairy case, consumers are also showing interest in the use of pesticides, growth hormones, and even antibiotics on the farms their products come from. Each store, and its private label partners, needs to look at its individual situation to see if there is benefit to including information above what is federally required on packaging labels.”

 “With the information available to just about anyone at just about any time, consumers will find out what they want to about the products they buy."

Digital can pose viable solutions. “It can be difficult to fit comprehensive product information on a label, but handheld electronic devices can now expand the physical label,” said Hiebert. “QR codes are a quick and easy way for packaging to link to a manufacturer or store website. Additional technologies are emerging that allow phone cameras to recognize products and bring up additional information on the screen, effectively making a static, printed label into a dynamic information screen.”

The organic market also continues to grow. Euromonitor has predicted continued growth of organic dairy with rates between 4.9 percent and 7.8 percent through 2017.

One barrier for organic products is price point. “Studies have found that about 20 percent of consumers would be willing to pay more for environmentally friendly and organic products,” said Hiebert. This presents an opportunity for private label organics to gain a competitive edge, “if they could bring the price point down a bit,” he continued.

Cracking the Egg Market

Almost anyone can sell eggs. But as channel lines blur across drugstores, supermarkets and mass merchandisers, retailers have yet another avenue of competition: online retailers.

New York–based online grocer FreshDirect just launched two new private label lines, Just FreshDirect, which has been rolling out 20 new products over the last month, and Cloud 9, which offers good value on household goods, such as paper products and plastic bags. Private label organic milk and eggs were included in the initial launch of the new Just FreshDirect line. The new eggs are produced at Alderfer Eggs in Telford, Pa., a fact FreshDirect will note to help maintain transparency.

The Just FreshDirect eggs will come in large ($3.99) and extra-large, and will be grown and packaged at the same family-run farm—which isn’t always the case, noted Emma Fuerst Frelinghuysen, senior director, private brands for FreshDirect.

Research led FreshDirect to offer USDA-organic eggs instead of opting for any of the other available claims for eggs, such as vegetarian fed, cage-free and so on. “There’re so many messages out there around eggs, it’s confusing to the customers,” said Fuerst Frelinghuysen. “Organic takes care of all that.”

SymphonyIRI Group data for the latest 52 weeks ending November 3, 2013, shows private label fresh eggs up almost 6 percent to $2.6 billion with a 56 percent share.

“On an equivalized dozens basis, unit volume is up nearly 3 percent, so we’re seeing healthy growth for control brand eggs across the board,” said Kevin Burkum, senior vice president of marketing for the American Egg Board, noting that prices are slightly higher this year due to increased feed costs.

Hiebert said that over the last decade, the egg market has grown diversified, with “many more specialty egg products, from organic to pasteurized-in-shell eggs. We’ve also seen eggs with functional additives, like omega fatty acids, which come from the hens’ diets.” These are potential growth areas for store brand egg products.

“We think more choice for the consumer in terms of sizes, varieties and egg types is a good thing,” explained Burkum. “I don’t think duplication is an issue for eggs—unlike other areas of the dairy case, such as yogurt.”

Burkum suggests using shelf signage to help educate consumers about the differences in the many types of available private label eggs, from omega-3 or organic to pastured or cage-free.

“Private label eggs are a core item not only within the egg case, but for the entire store,” said Burkum. “They are a traffic driver and a profit builder, and you can never have too many of those.” He also noted that he believes “the biggest competitors for eggs are outside the egg category, and include breakfast foods like cereal, yogurt and for families frozen waffles.”

Bold Butters

Prices of butter and margarine increased 22.3 percent and 12.5 percent respectively from 2009 to 2012, while oil prices during the same period declined nearly 12 percent from the extreme highs of 2008, according to Mintel’s August 2013 report, “Butter, Margarine and Oils—U.S.”

While Mintel consumer data does not show that high prices have significantly caused consumers to stop using edible fats and oils, prices are influencing purchasing behavior. Most notably, consumers who noticed the increase in prices in the 12 months prior to June 2013 were significantly more likely to buy store brands of the same products to save money.

Innovation also drives interest. “The significant rise in sales in 2011, driven by price increases and a jump in new product launches, indicates that innovation has the potential to drive interest and sales in the category,” said the report.

Besides adding olive or canola oil to make butter more spreadable, manufacturers are offering flavored butters, according to the IDDBA “What’s in Store 2014” report. Flavor ideas include basil pesto, blue cheese, Italian truffle, roasted garlic, porcini, and sun-dried tomato. Flavored butters made with olive oil and seasonings such as garlic and herb or Italian herb can serve as sauté starters. Also bringing innovation to the butter category is butter made with Greek yogurt, as well as butter made with specialty milk, like Tyrolean mountain milk.

“We’ve seen flavored butters marketed to quickly provide butter and spice/herb flavor to sautéed ingredients, to make quick sauces, and as condiments for the table,” said Hiebert.

Kroger, for example, rolled out six SKUs of savory and sweet finishing butters in October 2013 under its Private Selection label. Savory flavors include roasted garlic and herbs, lemon pepper, and lemon garlic and herb. Honey, cinnamon brown sugar, and caramel sea salt make up the sweet options. The products are sold in 3.5-oz. cups.

Yogurt’s Next Steps

Households with children are twice as likely as others to purchase more innovative yogurt products, such as yogurt with layered fruit, separate toppings, or packaged in tubes, according to Mintel’s August 2013 report, “Yogurt and Yogurt Drinks—U.S.” The report suggests marketers should emphasize innovative products to parents as a way to keep their kids interested.

According to Alfons van Heerwaarden, business development manager for Commonwealth Dairy, this is just what they did with YoYummy yogurt in pouch packaging, the newest addition to the Green Mountain Creamery yogurt line.

Walking the aisles at PLMA’s 2013 Private Label Trade Show, it was clear to see that pouches are the next big packaging trend for many convenience foods, from baby food to snacks.

“When we designed our pouch packaging, we wanted to create something appealing to the children (bright colors, fun flavors, great taste) and responsible to the parents (nothing artificial, less sugar, added vitamins, grade a milk, rBST-free milk, BPA-free packaging),” said van Heerwaarden. “Having a fresh yogurt with live and active cultures in a pouch is far more convenient and less messy than a yogurt in a tube. The pouch is also recloseable and easy on the go.”

He suggests that retailers can educate parents that yogurt is a healthy snack choice by displaying health information on shelf talkers, in store magazines and on websites. Advertising that private label yogurt has less sugar than the leading national brand can be beneficial to private label sales.

“All natural or only natural ingredients have become the standard for most retailers and consumers,” said van Heerwaarden, noting that “rBST-free is very important in the dairy market. The market for organic remains important, but supply and availability of organic drives up the price for the milk. Our products are naturally gluten-free. At first we didn’t have it on the package, but consumers kept asking, so we mention this now on our packaging, as well.”

Greek yogurt has also become an important trend, but getting the quality right in a private label product can prove challenging. “We strongly believe the consumer is getting more educated and will demand an excellent-quality Greek yogurt store brand, go for authentic strained Geek yogurt and not Greek yogurt that has been thickened with cream,” suggested van Heerwaarden.

Whether eggs, cheese, yogurt or milk, the bottom line is that American consumers are getting more educated about what they eat, or clamoring for retailers to provide them with this information. Certainly the theme for 2014 in dairy will be transparency and helping the consumer become clear about issues surrounding dairy products.

Eye on the National Brands

 Nielsen’s all outlets combined data for the egg category shows after control brands/private label, for the 52 weeks ending September 21, 2013, the most-popular fresh egg brand is Eggland’s Best with a dollar share of 11 percent and dollar volume of $582 million, up 11.7 percent. Eggland’s Best differentiates itself with prominently displayed nutritional information on front-of-pack. It has also diversified its value-added lineup with pouch-packed hard-cooked, peeled eggs, as well as egg whites in cartons.