“Private label has been winning on quality, on price, [and] on availability, and I think it's shown with some consumers that have switched that it's a good option, and one that some have said that they might stick with,” she said. “Private label has had a nice uptick, especially in some categories that you would think ... [like] if you think about some of the deli and the bakery categories, they've done quite well but also center store.”
Super premium, private-label products are up, but is that necessarily a contradiction?
Consumers are still feeling pressured to stretch their dollars between higher food prices, the return of student-loan payments, and other economic factors. However, they have become accustomed to these challenges and finding opportunities to purchase private label and premium-priced products.
“Retailers are focusing more on store brand unit growth, and we've seen that, so differentiation is key for branded. Premium is still in demand, which is interesting,” she said. “[Consumers] want to be able to have affordable luxuries and premium products, especially in the CPG and food and non-food, it provides us that ability to do that.”
When it comes to the food and beverage price tiers that have seen the largest increase this year, super premium offering registered a 0.3% increase in Q3 2023 and 0.1% in Q2 2023, while private label has remained steady in Q3 2023 but grew 0.3% in Q2 2023, according to IRI POS data, ending Sept. 10, 2023. Additionally, mainstream and value price tiers declined by 0.3% and 0.1%, respectively, in Q3 2023, and premium products remained steady with no percentage change.
Circana defined super premium as 1.5 times the average price of a product, premium at 1.25 times, and value at .75 times, while mainstream represents the average.
"It's kind of in the middle that's been a little squeezed. So, if you're competing in that middle, you may want to... assess your portfolio. Do I have something in that is going to be able to compete with private label, as well as do I have a super-premium offering?"
Rethinking pack size with private label, premium offerings in mind
CPG companies should also reevaluate their pack sizes when it comes to delivering private label and premium products, Wyatt noted.
“Pack size architecture is probably one of [those things] if it isn't on your agenda, it needs to be on your agenda because this is where you can look at entry price points and your premium price points, and then you can look at the different sizes that you have... We've seen pack sizes increasingly bifurcate... Large set pack sizes are continuing, but we see a shift downward.”
In the grocery channel, foods and beverages have largely stayed the same, with pack sizes increasing by 0.2% in Q3 2023, up from a decline of 0.1% in the previous quarter, while pack sizes for food and beverage products in other channels have grown by 0.9% in Q3 2023, up from 0.3% in Q2 2023. Snack bars, yogurts, and refrigerated entrees have increased in size over the last year, according to Circana data.
Looking to the new year, CPG companies need to understand “there's not a magic bullet” when it comes to the right size, and they need to provide products across a variety of price points, Wyatt said.
“What you have to do when you think about pack size and your portfolio is look at your target consumer, what sizes are they buying across ... different categories, and where does your category play on a discretionary standpoint,” she said. “Then, make your call, but we are bullish on that you want to have an entry price point and then you want to have a valley like a multipack or something like that, and then you have to decide what you need in between.”