Retailers Gain Share From Confectionery Giants With Private-Label Candy

As major brands raise wholesale prices, retailers are seizing on the private label opportunity.

On a call with analysts Wednesday (March 8) discussing its third-quarter FY2023 financial results, Casey’s, the third-largest convenience store chain in the nation, said confectionery giants’ recent price increases have left an opening for private label sales that was not there before.

“This is a great example of why private label is so important: we saw in the candy category that a lot of the national brands were passing on some impressive cost increases to all retailers, and it was starting to put some pressure on unit velocity,” CFO Steve Bramlage said. “That gave us confidence to go into the candy bar category, which historically has been a really difficult category to penetrate because of the brand strength of the national manufacturers.”

He added that the company’s private-label candy bars have “become some of the top-selling items in the category,” due to their competitive pricing relative to the quality of the product.

Bramlage’s remarks run counter to assertions by confectionery companies’ executives late last year that the strength of candy companies’ brands protects them from much of the inflation-related trade-down seen in other categories.

“Because of [our customers’] enduring brand loyalty, private label share is either flat or down in the vast majority of our markets,” Mondelēz International CEO Dirk Van de Put told analysts in November. “Shoppers continue to say they are much less likely to switch to private label in chocolate and biscuits compared to other categories.”

Yet inflation is taking a toll on brand loyalty among many consumers, according to data from the latest edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” which draws from a February survey of more than 2,100 U.S. consumers.

The report identifies a group of grocery shoppers, the “persuadables,” who seek a balance between deal-seeking and brand loyalty. This group, representing 39% of consumers, stands in contrast to the 17% that remain loyal to their favorite brands and the 44% that are always seeking out discounts and special offers.

Indeed, many consumers have been making changes to their shopping lists. The study “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening,” for which PYMNTS surveyed more than 2,600 consumers in September, revealed that 37% of grocery shoppers reported purchasing lower quality products to reduce their expenses in the face of inflation.

In the quarter, the convenience store chain also saw consumer demand for delivery boost digital engagement.

“Our guests are taking advantage of our ability to deliver grocery and general merchandise products, because delivery is over-indexed versus other digital grocery and general merchandise transaction types such as pickup,” Casey’s CEO Darren Rebelez said.

Research from PYMNTS’ study, “ConnectedEconomy Monthly Report: The Gender Divide Edition,” which drew from a survey of more than 2,600 U.S. consumers in October, found that 43% of men and 35% of women buy groceries online for home delivery, and 42% and 28%, respectively, use same-day delivery aggregators.