Keurig Dr Pepper Joins Push Back on Private Label

Coffee and soft drink stalwart Keurig Dr Pepper added its voice Thursday (Oct. 27) to a growing debate over consumers’ trade-down behavior, saying much of the inflation-motivated turn towards private labels that grocers have been observing is overstated.

Instead, the company told analysts, it thinks the shift is primarily due to the normalization of pandemic-era habit changes.

“What we saw during COVID … [included] a spike in premium coffee brands at the expense of private label and our point of view was that would normalize over time,” Robert Gamgort, the company’s executive chairman and former CEO, said on a call discussing the company’s third quarter 2022 financial results. “Attachment rate is back to normal levels, … and the balance between private label and premium and mainstream is back to where it was before.”

Gamgort’s remarks echo recent statements by other leading consumer packaged goods (CPG) brands. For instance, earlier this month, Nestlé reported its sales for the first nine months of 2022.

The company’s CFO Francois-Xavier Roger similarly argued that the recent growth of private label is more than just a result of rising food prices; it also marks a return to pre-pandemic behaviors. He pointed out that private-label sales took a hit during the worst stages of the virus and asserted that the uptick in the category marks, in part, a “normalization of their supply chains.”

While Keurig Dr Pepper is certainly not completely unbiased on the subject, benefitting from consumers’ attachment to its branded products, the company is nonetheless “the largest producer” of single-serve K-cup coffee pods for private label brands, CEO Ozan Dokmecioglu noted.

“So, if the private label increases share or there’s a trade down going on, we will still contribute and participate to the economics of that,” said Dokmecioglu.

While the turn to private label may in part be a normalization to pre-pandemic trends, as F&B brands argue, grocers’ observations that their customers are trading down, looking for less expensive product options, are certainly consistent with consumers’ self-reports.

For the October edition of the Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: Consumers Buckle Down On Belt-Tightening,” PYMNTS surveyed a census-balanced panel more than 2,600 U.S. consumers in September. The study found that 37% of grocery shoppers report purchasing lower quality products to reduce their expenses in the face of inflation.

That said, F&B brands predicting a normalization in the months ahead may be onto something. Scott Crawford, chief merchandising officer at Ahold Delhaize subsidiary FreshDirect, an eGrocer primarily focused on the tri-state area, noted in an interview with PYMNTS that it seems that some of the unpredictability seen this year is already settling down.

Reflecting on trends in the past few months, Crawford said, “We’ve seen price increases from the vendor community stabilize. … They’re not coming in as fast as they were coming in the previous six to eight months before this timeframe.”