For the past several months, we’ve seen sales for U.S. store brands grow at unprecedented rates with annual sales of $85.5 billion, up by $13.6 billion (+19%) vs. just two years ago. (Nielsen Grocery/Drug/Mass including Walmart). At first, this growth was driven by higher prices for milk and other commodities. Then the economy got even worse, and many just assumed that shoppers were switching from national brands to store brands to save money.

But what about the other factor we sometimes forget to mention? Could it be that retailers are making significant improvements in the quality of their own store brands? Is it possible that some National Brand Equivalents (NBEs) have really become every bit as good as the national brands? Note: Several years ago, I coined the acronym, “AAGATNB” (Almost As Good As the National Brand), but it never really caught on the way I hoped.

I recently had the opportunity to visit the East View Innovation Center in Eden Prairie, Minnesota, where the folks at SUPERVALU develop brands like Culinary Circle and Wild Harvest. I had been hearing a lot about this state-of-the-art facility with its sensory labs, test kitchens, mock-up store, and army of Daymon associates fully integrated into the organization. Needless to say, I jumped at the opportunity to check it out for myself.

It was clear from the start that the facility itself is just part of the story. SUPERVALU has assembled a dream team of experienced product development specialists from across the industry. Many of the top managers moved to Minnesota from out of state, betting their careers on the success of the “Our Own Brands” program. Every person I talked to that day seemed convinced that they were working on something special. One even commented, “I didn’t come here for the weather.”

The Our Own Brands program at SUPERVALU is an unmistakable source of pride for those working in the East View Innovation Center. When I began discussing recent trends in private label, I was politely corrected by Group VP, Mike Witynski: “This isn’t about labels. We’re building brands here.” He was right. Nowhere did I get the sense that this was simply about making cheap substitutes for national brands. A sense of pride seemed to permeate the building. While touring one of the test kitchens, one associate described a recent blind comparison with a popular national brand: “They’d kill to have our taste test scores!”

I was also impressed by how they view their competition. Many store brands target CPG category leaders. SUPERVALU, however, has broadened its competition to restaurants with several premium “restaurant-quality” products. I was lucky enough to sample some Culinary Circle frozen desserts that could rival the best ice cream parlors. The trick will be getting shoppers to try these products. Although higher price points may present sales challenges, the quality and exclusivity of brands like Culinary Circle have the potential of becoming destination products for consumers who can appreciate the difference.

National brands need to be on their toes. There are no clear signs that shoppers will turn away from store brands as the economy improves. Retailers like SUPERVALU and others are poised to succeed with their own premium brands as consumers continue to adjust their mix of needs between quality, value and convenience. SUPERVALU has set aggressive growth targets for its Own Brands program with an unblinking eye on the consumer. This consumer focus is something new for most store brands. Understanding the shopping experience from a consumer perspective isn’t just for CPG manufacturers anymore.

1. Health Claims – “Now with More Calcium”, “Good Source of Antioxidants”, “Natural”, “Made with Real Sugar”.  First look for claims you can make without reformulations.  Then consider adding nutrients to add perceived value. 
2. Unique Packaging – Consider Dean Milk Chugs in a category dominated by private label.  Older shoppers may appreciate packaging that easier to open, easier to re-seal, and easier to read without glasses.
3. Line Extensions – Look at the soda category with only 6.1% private label share.  Every year we see many new soda flavors, but very few really “new” brands.   In most stores, private label is left with limited SKUs and shelf space.
4. Promote a Cause – Don’t just offer a percent your profits.  Build awareness.  Educate the consumer about a cause you can really embrace.  Let them know how they can get involved.   
5. Odd Ounces – It’s easy for store brands to copy products sold with the same package size year after year.  Shifting a 12 oz. package to 15 oz. makes it difficult to compare prices to store brands.  Going metric makes the price comparison even harder.
6. Offer Your Own Value Brand – Look at the hair care category with only 2.2% private label share.  National value brands make it difficult for store brands to get a foothold.   
7. Local Ties – Each year have your sales force apply labels to packages in the store, reminding shoppers when a product is grown locally, processed locally, or warehoused locally.  In today’s environment, shoppers are likely to support the local economy.
8. Differentiate Yourself – Compete with private label like you compete with any other brand.  Set your brand apart with a clear case for why it’s worth more than the store brand.
9. “Green” Sizes - We used to call them “value sizes” or “club packs”.  Most large pack sizes use less packaging by nature.  Combine the value message with the green message.  Give shoppers a way to help the planet while saving money.
10. Keep Innovating – Be a moving target.  Make your brand difficult to copy.  Give shoppers a reason to spend a little more on your brand.  Whether it’s packaging, labeling, health claims, or new flavors, use your brand equity and category expertise to push the category forward.

For the flip side… check out Five Ways To Build Store Brands in the latest issue of Consumer Insight.

Private label dollar sales are being driven primarily by higher commodity pricing — especially in staple categories that are dominated by private brands. But in recent weeks, private label unit sales have also grown — a sign that consumers are starting to shift away from established brands in search of better deals.

Among private label food brands, flour (+35%), baby food (+33%), and fresh eggs (+28.2%) showed the largest dollar percent change during the 52 weeks ending September 6, compared with the prior 52-week period.  Unit sales for those products remained flat during the same period: flour was up 7.2%, fresh eggs dropped 0.9%, and pasta grew by 0.6%.

Among non-food private label products, soaps and bath products (+23%), cough and cold remedies (+18%), and hair care products (+18%) showed the largest dollar sales growth during the period.  Paper products, like paper plates, paper towels, and toilet tissue, and aluminum foil were the top-selling non-food private label items. 

Across categories, health and wellness-oriented private brands also showed significant growth, according to Nielsen.  Products claiming to be “natural” (+11.4%) or “organic” (+22.5%), lacking in trans fat or saturated fat (+30.5%), or containing “multi-grains” (+16.6%) or “antioxidants” (+15.8%) showed the largest dollar sales growth during the period.  Products that claimed to contain no calories (-0.6%) or to be caffeine free (-2.2%) showed the only negative growth. 

Among organic private label items, milk, eggs, and produce – like mini carrots and salad mixes — were the top-selling items.

View in depth private label sales data from Nielsen.

Learn more about private label sales in convenience stores.

Read more about overall private label trends in Nielsen’s “Consumer Insight” newsletter.