Private brands could 'explode' in next five years

Get ready for private brands to explode.

That was the message from Diana Sheehan, director of Kantar Retail’s grocery channel research team, at an ECRM conference focusing on store brands last week in Orlando. Sheehan cited an influx of private-branded products on the coasts and an increase of millennial shoppers as her reasons for feeling bullish about private brands in the United States.

“We have seen strong growth in private label over the last few years,” Sheehan said, noting that Kantar Retail estimates store brand sales at $120 billion. “My expectation is you are going to see private label sales increase at a faster rate in the next five years than in the past five years.”

Sheehan said while store brands have performed well at retailers throughout the Midwest, the East and West coasts have yet to fully embrace private brands. But that is about to change thanks to Lidl, Aldi and Ahold Delhaize, which all offer an array of private brands.

German retailer Lidl plans to open 20 stores in Virginia, North Carolina and South Carolina this summer and 100 stores in total by mid-2018. Aldi, Lidl’s German counterpart, recently announced an aggressive remodeling and expansion program, including the opening of 34 stores in Southern California, and aims to have 2,000 U.S. stores by the end of 2018. Ahold Delhaize, fresh off the merger of Ahold and Delhaize, already has a strong presence on the East Coast and has plans to ramp up its private brands through its new “Better Together” strategy.

“I think you will see a lot more investment and more creativity [on the East and West coasts],” Sheehan said, noting that Lidl’s, Aldi’s and Ahold Delhaize’s impact could spur other regional and national retailers to up their private label games.

Sheehan also said millennial shoppers will continue to spur even more growth in private brands.

“Millennials tend to be much more open about private label,” she added. “They don’t have the hang-ups, the legacy or past perception that older shoppers have in the private label space. So when you have retailers doing private label well and you have shoppers open to [those products], it’s a perfect situation to see a jump in growth.”

The challenge with millennials is getting them to “experience” store brands, Sheehan said.

“You have to get those products into their baskets,” she said. “The good news is that the trust is there. You are not in the place where you have to convince them that private label is just as good as brands. They trust the retailers.”