Nielsen: Own brands are driving shoppers into deep discount grocery

CHICAGO — A strong proliferation of own brands is helping deep discounters, such as Aldi and soon Lidl, grab additional shopping trips, even if it means shoppers at the end of the day are spending less per trip, a Nielsen analysis published Wednesday revealed.

"For many retailers, but particularly deep discount retailers, store brands play a strategic role for winning over shoppers from other channels," Nielsen noted. "Compared with other major retail channels, deep discounters have more than twice the store-brand share of dollars."

"Deep discount grocery retailers are certainly reaping the benefits of having a robust store-brand presence within their stores.”

In fact, for the first time in more than a decade, shoppers actually made more trips to stores, taking an average of 109 trips per household in 2016. However, despite this increase in trips, overall spending was flat, as 85% of those additional trips had smaller basket sizes (fewer than 15 items per trip) compared with the year prior.

While consumers are taking more trips across most retail channels, deep discount grocery is seeing some of the largest increases in shopper activity. In fact, while trips across all channels are up 0.5%, shoppers took 2.8% more trips to deep discounters in the last year. However, only about 40% of households shop at deep discounters, which is much lower compared with more established channels like supermarkets and mass merchandisers. For deep discounters, there are still significant opportunities for growth ahead, unlike the already saturated conventional grocery channel.

What’s more, deep discount grocery and online channels were among the top beneficiaries of consumer spend leakage from mass merchandisers. With online grocery sales anticipated to reach $100 billion by 2025, e-commerce will continue to siphon off sales from other channels. Part of the reason consumers are going online is because they’re seeing value, spending more per trip on store-brand purchases made online ($17 average) compared with the total average basket spend on store brands across all channels ($12 average).

When it comes to deep discount grocery chains, store brands make up a majority share of sales in three departments: dairy (72%), grocery (52%) and frozen food (53%), Nielsen reported. This is driven by both penetration and trips, with consumers making more trips to purchase store-brand grocery, dairy and frozen products (up 3.3%, 5.7% and 3.7% in trips, respectively, compared with the prior year) than trips made for branded products from these departments.  

"Deep discount grocery retailers are certainly reaping the benefits of having a robust store-brand presence within their stores," Nielsen noted. "With consumers taking three times more trips including store-brand purchases to deep discount grocery stores compared with other channels, like mass merchandise or dollar stores, opportunity for growth should only continue to rise."


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