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In recent years, the grocery industry, including store food brands, has seen many significant changes, including stronger regulations, harsher punishments for food crises, and major food recalls. Meanwhile, consumers’ increasing influence and pressure has encouraged retailers to embrace corporate social responsibility (CSR) and sustainability practices for a competitive advantage. Additionally, consumers are demanding greater transparency and visibility into the supply chain.
CSR and sustainability initiatives are no longer nice-to-have programs – they have become business requirements to help retailers compete effectively for conscious consumers’ wallets. So what exactly to consumers expect and what can retailers to do adhere to their expectations?
In response to the consumer’s demand for non-genetically modified foods (GM foods), many retailers have taken action. Nearly all supermarkets in various countries across Europe (including the UK, Ireland, Switzerland, France, Germany and Italy) ensure that they avoid GM foods and that livestock are fed on non-GM food diet. The sanction for neglecting to comply to this regulation is particularly harsh in most Italian regions, where anyone found growing GM food crops faces two years in prison or a €50,000 fine. Growing numbers of consumers expect retailers to clearly evidence the fact that a particular product has not been genetically modified before making a purchase.
The same amount of transparency is also expected for Fair Trade products, which have similarly experienced a significant increase in consumer demand over the years. This was reflected in the UK where sales of certified Fair Trade products grew by 2% in value to £1.64 billion in 2016. Fair Trade reflects a movement that aims to reduce poverty, and promote ethical and environmentally-friendly work conditions in developing countries by helping local producers earn a fair price for their products. Fair Trade products can be distinguished by the distinctive blue, green and black logo. With popular supermarkets such as Carrefour experiencing a rise in sales of their own brand Fair Trade products (up 20% from 2015), it appears that other supermarkets should and are expected to follow suit.
The results of a recent Trace One consumer survey evidenced that they showed mixed feelings for their level of trust in Private Label. Only 23% of respondents completely trust the safety of the Private Label products they consume, while 44% said the main reason for not buying Private Label brands is that they trust national brands more. These numbers clearly show that retailers and manufacturers must prioritize their efforts to improve consumer confidence in their brands and Private Label products.
To attract shoppers with a more diverse and plentiful product offering, retailers are adapting their product lines and even their store formats. In a recent Trace One study, it was identified that having access to diverse product offerings was one of the most important factors for consumers in terms of influencing their purchasing decisions amongst Private Label grocery brands. Read on to establish ways in which Private Label products can help retailers successfully diversify their product offering, thus helping them to achieve differentiation.
Examples of retailers diversifying their product offering in order to attract shoppers include German retailer Aldi who addressed consumer preferences by removing particular food ingredients (such as MSG and hydrogenated oils). With 90% of Aldi products being sold under private brands, the retailer can ensure customers have a wide selection of options free of these ingredients.
In the US, health food retailer Whole Food’s has offered new food choices and adapted their formats and business models in order to appeal to Millennials. The retailer says its modern, streamlined design with innovative technology and a carefully curated product mix offers an efficient and rewarding way to grocery shop.
Private Label products act as brand differentiators for retailers, as they drive store traffic and penetration across categories. In a recent Trace One study, investigating what consumers think about Private Label, it was established that ‘good value’ was one of the most appealing factors. According to their feedback, Private Label’s strengths include low cost, variety and quality; however, product taste and innovation need improvement. Through ongoing collaboration, retailers and manufacturers can find ways to keep costs low, continuously improve food quality and taste, and develop innovative products to create a competitive advantage.
Collaborating with Private Label partners can help to discover new ways to approach product development, packaging and visual appeal to respond to consumers’ needs and increase their willingness to buy. Innovation can also differentiate products by articulating how they are distinct from national brand.