With inflation and gasoline prices at record highs, the American consumer is feeling the pinch of rising costs. Eighty percent of consumers are looking for ways to save money, and shoppers are targeting less expensive brands, according to Kristine Modugno, director of category management, Nouria, based in Worcester, Massachusetts. Nearly one-third of shoppers report buying more private-label products now than they once did.
Modugno shared that private-label sales in the convenience channel were robust in 2021, up 17.8% year over year, outpacing national brands, which only saw 4% sales growth. C-stores also outpaced private-label growth in all other channels, which combined saw a -0.7% growth.
“These are great numbers, especially when we take into account the decrease in new private-label introductions,” said Modugno. “Compared to 2020, c-stores introduced 27% fewer products in 2021. This was due in part to manufacturers not willing to take on new product lines or customers amid the challenges of COVID-19.”
SALTY AND SWEET SNACKING
Private-label salty snacks represented a small (1.8%) but growing portion of the category’s sales. Private-label salty snacks sales experienced 16.4% year-over-year growth compared with other channels, which were down nearly 4%.
“This is a great space to add unique and signature flavors and enhance the offering in your store rather than duplicate the brands,” said Modugno.
Private-label alternative snacks sales growth was far higher in convenience than in other channels, said Modugno. Alternative snacks sales in the channel were up 45.6%. All other channels combined were at 7.8%.
Meat snacks were the top driver from both a dollar and percent change standpoint, with the subcategory’s sales up 60% year over year in convenience stores versus all other channels, which clocked in at 9.3%.
“I have seen several c-store chains bring in this category last year, so it’s definitely a [sales] driver, but [meat snacks are] also a higher ticket item. The timing was perfect with consumers looking to save,” said Modugno. Private-label pretzels grew 41%, while private-label energy bars, potato chips and other salty snacks were all up over 30%.
When it comes to private-label packaged sweet snacks, year-over-year sales at c-stores were comparable to all other channels at 20.8% and 15.0%, respectively. Looking into the subcategories, snack cakes/pastries and muffins/donuts drove the year-over-year growth.
“The data showed that grab-and-go smaller [package] sizes drove the increase versus take-home sizes,” said Modugno. “This is another category that is perfect for developing your own recipes and avoiding duplication.”
This is a great space to add unique and signature flavors and enhance the offering in your store rather than duplicate the brands.
COMMISSARY AND SPORTS DRINKS
Convenience private-label commissary was up 29.8% and had the largest dollar growth of all categories as well as the largest share of sales at 60%, which also outpaced all other channels, according to Modugno. While experiencing robust year-over-year sales growth (46%), private-label ready-to-eat meals and salads/sides decreased slightly in terms of share of convenience sales. All other channels outpaced the convenience channel’s year-over-year increase in sandwiches, salads and sides.
Another top private-label category for c-stores was packaged beverages with year-over-year sales at 18.2%, compared to all other channels (3.8%)—that’s five times higher.
Sports drinks performed exceptionally well, said Modugno, up over 60% year over year, despite being a small percentage of the total category.
“I am sure some of the branded shortages help fuel this, and we also have several retailers with great programs,” said Modugno, who pointed to 7-Eleven for its innovation in the subcategory with its Replenish private-label sports drink line.
“It’s important that we continue to offer value and promos in our stores, whether it’s through private label or branded promotions,” said Modugno. “It’s not easy given all of the cost increases we are seeing, but you can get creative as it’s really a perceived value.”
Consumers trust private label more than ever.
DRIVING LOYALTY
According to a consumer survey from the Food Marketing Institute and IRI, 46% of consumers say store brands influence their store choice, which is up 11% over three years earlier. “I think this is amazing,” said Modugno. “This really shows that private label drives loyalty.”
Eleven percent of consumers purchased more private products instead of known brands in 2021 versus 2020, and the top reason that consumers buy private label is because they believe the products are equal quality for less money, according to a McKinsey & Company State of Grocery Consumer Survey. “Consumers trust private label more than ever,” said Modugno. “This is due to the consistency in quality we are seeing across every channel, and it’s also because the number of retailers that are innovating on their private-label brands is elevating the quality perception for all of us.”
Modugno said that when shoppers were asked what would make them shop convenience retail, a lower price was by far the most selected factor at 55%, which was more than double the next closest factor, according to the 2021 NACS Convenience Voices survey.
“Yes, we are perceived as being a high-priced channel, but the lower cost of private-label products can help to change that perception,” said Modugno. “Keep in mind your shoppers have your store as a frame of reference when it comes to price. When they are inside your store, offering more promos on your private label, ‘two-for’ deals, anything can help them perceive lower price. If the consumer sees the value, it can help you maintain better margins.”
According to the NACS Consumer Voices survey, when shoppers were asked why they chose to shop at a particular convenience store, nearly 30% cited “products” as a reason. Of those shoppers who selected a store based on products, 18% said that store brands, generic or private labels helped to influence their store selection.
“While that’s a good percentage, there is opportunity to attract more shoppers and make your stores a destination for your private label,” said Modugno, who added that the convenience channel is similar to the grocery channel—both share the same customers, and 46% of grocery shoppers said store brands influence their store choice.
Give your brand premium and ample space in your stores.
Seventy-nine percent of shoppers say they are aware that convenience stores sell private-label products, and more than 70% say they’re likely to buy private label at c-stores. The top three categories that shoppers say they would purchase are beverages, snacks and candy.
Modugno also said the point of entry for private labels is open to convenience stores of all sizes. Sometimes smaller c-stores can’t meet the minimum amount of production from manufacturers for their private-label products, so she encouraged retailers to reach out to smaller manufacturers so both companies can grow together.
“If you want to be a strong brand and you want your brand to become a destination then act like a national brand,” said Modugno. “Innovate. Give your brand premium and ample space in your stores. Market it like national brands do. If you want your guests to believe in your brand then show them that you do.”