On the supply side: Walmart launches new private label Bettergoods
Walmart has a long history with private brands, offering more than 29,000 products in 20 categories since 1983. Among these is the Ol’ Roy dog food brand, named after Sam Walton’s English Setter and produced for the first time by Simmons Foods in Siloam Springs.
Walmart recently launched Bettergoods, its largest private label in 20 years in the food and consumable categories, as part of its strategy to lower prices and capture market share. The brand’s launch came as Walmart announced that the market share of its private brands continued to increase.
Chief Financial Officer John David Rainey recently told investors that over the past year, more than half of all customers’ grocery carts contained a private label.
Over the past 12 months ending Jan. 31, Walmart said 26.4% of its total grocery sales came from its private label offerings. Consumer analytics firm Numerator reports that Walmart has four of the top five private brands ranked by household penetration with Great Value at 72.7%, Equate at 52%, Marketside Fresh at 44.2% and Guaranteed Fresh at 40%. % of American households in 2023.
On a recent earnings call, Walmart CEO Doug McMillon said 70% of Bettergoods items are priced under $5.
“This is the type of quality and value that will resonate with customers of all income levels,” McMillon added.
Consumers can expect the brand to offer products in different categories with prices ranging from under $5 to $15. The brand includes:
- Seasonings for about $3.
- Specialty soups like Creamy Corn and Jalapeno Chowder for under $4.
- Sauces like bronze cut pasta for $1.97.
The retailer said the product rollout will be rapid and many items, from ice cream to mac and cheese, are already in stores and available online.
CONSUMER REACTION
Several years ago, Walmart increased its investment in the Great Value ice cream category. A Numerator report found that 39.5% of Bettergoods shoppers bought the ice cream for its flavor, and 38% said the price motivated their purchase. About 31% purchased Bettergoods ice cream based on its nutritional characteristics. Numerator found that the new brand appeals to both low- and high-income groups.
Bettergoods appealed to low-income households, who were 34% more likely to purchase the new brand. High-income households are 20% more likely to choose premium products over high-value products.
Numerator said the bifurcation suggests the brand can appeal to lower-income consumers who want to treat themselves while offering higher-income consumers a product that goes beyond basic needs at an affordable price.
Although early, Bettergoods’ performance is promising. Numerator reports that 78% plan to repurchase the brand on their next ice cream trip, and 46% find it offers better value compared to other ice cream brands. Additionally, 37% of shoppers say Bettergoods is healthier than other brands and 34% think it has higher quality ingredients.
The numerator said that Bettergoods ice cream is more expensive than Great Value, but less expensive than major brands. It also gives consumers the opportunity to trade while saving money.
Because Bettergoods fits three major food trends – culinary-inspired, plant-based and plant-free – analysts believe the brand will find a home in households of all income levels, which could pose a problem for competitors .
Numerator also warns that Walmart’s Bettergoods brand is cross-selling into other categories, as 63% of shoppers said they are likely to purchase other grocery products. If Bettergoods continues to grow to the Great Value level, Walmart could realize gains at the expense of larger brands and competing retailers, the report notes.
Fayetteville-based Field Agent also recently surveyed consumers about their impression of the Bettergoods brand. This survey found that 75% of consumers were unaware of the new brand until they received their fact-finding assignment. Of those who have heard of the brand, only 35% have tried it. The overall impression of the brand at first glance was positive.
Field Agent survey respondents rated Bettergoods ice cream packaging, ingredients and pricing as good (49%), excellent (25%), fair (23%), poor (3%) and very poor (1%). Field Agent also asked respondents to compare the quality of Bettergoods ice cream with other brands. Quality was mixed, with 46% finding it better, 51% considering it the same, and 3% disliking it.
The main distinguishing factor of the Bettergoods brand was its affordability, according to 35% of field agents surveyed. Additionally, 53% of respondents said Bettergoods would likely strengthen their customers’ loyalty to Walmart. As an indicator of future performance, Field Agent found that 42% of respondents said they were likely to purchase the brand and 23% definitely intended to do so.
COMPETITORS’ REACTION
Scott Benedict, a contract partner at retail consulting firm McMillanDoolittle, said Walmart’s private label expansion would likely involve providing a higher quality product to consumers who want something more without spending much more.
The launch of Bettergoods follows Kroger’s Smart Way private label, which launched in September 2022. The grocery giant announced in March that it plans to add more than 800 items to its private label products as it expands. more and more Americans are preparing their meals at home instead of eating out. The Numerator reports that Walmart maintained private label market penetration of 72% last year, but Smart Way grew the fastest in the grocery market.
“We expect consumer confidence to improve in 2024, but our customers will still have to navigate many of the same macroeconomic pressures as last year,” Kroger CEO Rodney McMullen said during a recent conference call on the results.
Target also recently announced plans to lower prices on 5,000 frequently purchased items. The price reductions will take effect this summer.
“Consumers will benefit from savings on everyday items such as milk, meat, bread, soda, fresh fruits and vegetables, snacks, yogurt, peanut butter, coffee, diapers, paper towels, pet food and much more. These price reductions will collectively save consumers millions of dollars this summer,” said Rick Gomez, director of grocery at Target. “We know consumers feel compelled to make the most of their budgets, and Target is here to help them save more for their everyday needs. »
Target’s private food brands, Good & Gather and Everspring, were among the products whose prices fell about 5% and 9%, respectively. Target said it is also working with brands like Clorox, Purina, Kimberly Clark and Pepperidge Farms to lower prices.
Benedict said Bettergoods is a way for Walmart to retain some of the higher-income shoppers it has attracted in recent years. He doesn’t see the new brand taking shares from Great Value. The Bettergoods brand targets younger, more affluent, trend-oriented consumers looking for vegan options and specialty ingredients with assorted packaging.
Editor’s note: The supply side section of Talk Business & Politics focuses on businesses, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Fire Mastery.
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