CHICAGO — From 7-Eleven’s energy drinks to Buc-ee’s Beaver Nuggets, convenience stores have seen success with private label, and it’s growing. Private-label brands took in $4.2 billion in c-store sales, according to IRI data for the 52 weeks ending July 14, 2019. While that’s a small number compared with $153.7 billion for national brands in the same time frame, c-store sales of private-label brands were up 6.2%.
Brad Cohen, senior project consultant with Orlando, Fla.-based consulting, marketing and data analysis company LMS, talked to CSP about private label’s increasing potential.
What’s behind the surge in private-label sales?
From a customer standpoint, one of the main drivers is loyalty, and the perception of value and oftentimes the true value.
On the business side of things, the driver is the dollar—that the business can make a better margin on a private-label product than they can on national brands.
Which types of products benefit from a private label?
The products that benefit are the ones that are easily comparable. So, for instance, in snack foods, mixed nuts—you can look at a bag of pecans and see the size of it. You can see the percent of breakage, the quality of it vs. another brand of nuts.
You can look at a private label in CVS, look at their extra-strength [acetaminophen], compare it to Tylenol and look at the label, and you can see the ingredients are the exact same.
Which products aren’t benefiting from the private-label trend?
In general, health and beauty. Shampoo and your hair is very important to you. With those types of things, it’s hard to break away. For some of these things, if you buy it you’re making a commitment before you even know if you’re going to really, truly want to substitute your loyalty for whatever perceived value or reason you would buy it.
How long do you expect private label’s growth to last?
It’s going to be several years. When you look at the ideal sweet spot of where a national [retailer] like a Kroger’s or 7-Eleven who would like to see their private-label percentage of sales [grow], it’s going to take a while for that to get to where they want it to be. … As far as the food industry goes, you’re looking at about a 30% [share of sales], give or take. It’s going to end where you find out customers’ loyalty won’t go away from the big brand.
What factors overall contribute to a private label being successful?
Volume is important. So if you own a corner store and want a private label, you can [have one], but it’s going to cost you some money. If you have 50 stores and you want a private label, it’s going to be more beneficial, and it just scales up. So being able to go to a private-label manufacturer and buy five truckloads of product vs. one truckload of product, you’re going to be able to get a better deal.
What’s the payoff for private-label brands? Is it worth the time, money and effort?
Yes. And the best way to ask the question is to identify your top sellers, and then go to the private labelers and ask, “Based on your sales of these items, does it make sense?”
So where do you see more opportunity for convenience stores?
It’s just part of the model in the future. For the private labelers, it’s in their best interest to figure out a way to make it successful for these smaller retailers and up-and-comers, because you can’t just depend on the big-box and national brand chains to move your product. You do have these smaller folks that meet these regional needs, and there’s a market for it.