Kroger, the US grocery chain, is seeing strong sales of its private-label brands as consumers look for cheaper options during the holiday season amid ongoing inflation.
“It is clear that inflation remains top of mind for our customers and for our company,” said Rodney McMullen, chairman and CEO of Kroger, on its Q3 earnings call.
According to company research, 48% of Kroger customers had planned to cut back on their Thanksgiving celebrations due to inflation.
With research showing that cooking at home is three to four times less expensive than dining out, McMullen added that the company is seeing “more customers engage with our [private label] brands as a way to stretch their food budgets without compromising on quality”.
Why it matters
Owned by retailers, private-label products often have a lower price point than branded competitors, performing well in economic downturns as consumers look to cut spending.
This is good news for retailers, but can be challenging for brands competing in categories with a strong private-label presence.
Kroger’s private-label products saw a 10.4% increase in sales year on year, in the most recent quarter. Shoppers are also more aggressively downloading digital coupons – a 32% increase year on year – and engaging with promotional offers, which is to be expected around the holidays.
“What we find is when customers move to our [private label] brands, that’s very, very sticky because of the high quality of the product and the satisfaction there,” McMullen said. “What we find is even when things are getting normalized, our brands come out of that at a higher penetration level than going in, which is long-term good for our business as well.”