In a move to attract cost-conscious consumers with low prices, FreshDirect is taking advantage of parent company Ahold Delhaize’s extensive portfolio of private label offerings to add more low-cost products to its e-shelves. The New York-based online grocer, which delivers in select markets throughout the Northeast, announced it is adding 250 center-of-store SKUs from its parent’s Nature’s Promise and Taste of Inspirations brands. The company is also lowering prices across multiple categories.
Read more: Dutch Retailer Ahold Delhaize Acquires Majority Stake In FreshDirect
“FreshDirect is upping the convenience of one-stop shopping to bring customers great value on center of the store products,” said Scott Crawford, the grocer’s chief merchandising officer, in a statement. “We continue to integrate the stellar resources and expertise of FreshDirect and Ahold Delhaize to super-serve customers so they can address all of their grocery needs in one purchase.”
The move marks a departure from the grocer’s original reputation for targeting higher-income markets with premium offerings.
The Context
So far, 2021 has been a year of private label growth for many grocers, investing in research and development to debut creative new offerings. Companies ranging from wholesalers such as United Natural Foods, Inc. (UNFI) to major retailers such as Target and Amazon to smaller, more boutique grocery and convenience stores have been investing in their brands.
These brands are able to build loyalty in a couple of major ways. First, if a retailer can keep the price of its private label offerings low enough, they can woo price-conscious shoppers. Second, if the quality is high enough, retailers have the opportunity to secure consumers’ brand affinity the way that a major national brand would.
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What the Data are Saying
According to a Coresight Research report, the market for private label products has been growing more quickly than for name brand goods for four years in a row, with the former growing 13.7 percent, 6 percent faster than the latter, in 2020. Additionally, Statista data find that 9.3 percent of all CPG sales are for eCommerce private label products.
The main reason consumers switch to private label brands is price. A McKinsey survey from 2020 found that 45 percent of consumers who switched to private brands did so for the lower cost, and the next most common reason was that the retailer did not carry the consumer’s favorite name brand.
What the Experts are Saying
One of the key benefits of private label brands is that they boost grocers’ margins. As Target Chief Growth Officer Christina Hennington said on a call with analysts in March, “Our own brand portfolio, which spans all categories, is vital to the success of our business. It represents about one-third of our total sales and even more of our gross margin, which helps to sustain key enterprise investments.”
Related news: Target Sweetens Private-Label Grocery Offerings To Boost Margins, Attract Partners
Leading retailers are looking to strike the right balance of own and name brand goods, meeting consumers’ need both for affordable options and for the products they love.
“There’s always potentially need for a branded item and there’s potentially a need for private label,” Mitch Madoff, senior vice president of private label and supply chain for next-gen convenience retailer Foxtrot Market, told PYMNTS in an interview. “And really our goal is to make sure that we have an assortment that really meets people along their journey with what they’re looking for.”
See also: Foxtrot Gets Whole Foods Exec To Build Private-Label Brand Arsenal
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