Target Sees ‘Explosive’ Growth of Private Label Sweets Amid Inflation

Target has observed that its investments in private-label sweets keep customers coming back.

On a call with analysts Tuesday (Feb. 28) discussing its Q4 financial results, the retailer observed that, in addition to seeing its third consecutive year of double-digit comparable sales increases in food and beverage, it also benefitted from high demand for novel, affordable indulgences.

The retailer’s Favorite Day brand serves as a strong draw for customers at a time when private-label adoption and comfort eating are both on the rise.

“[We’re] introducing that level of newness and interest in categories like food and beverage and essentials. Our Favorite Day brand that we’ve launched over the last couple of years, which is a sweets brand, has been has seen explosive growth over the last year or two,” Chief Growth Officer Christina Hennington said on the call. “This is a place where we’ve taken the liberty to innovate in basic categories, whether it’s cookies or ice cream and so forth, and the flavor profiles, the way that they brought the items to market have really shown that the guests will engage across the board if we give them a reason to.”

Target is not the only company noting increased demand for sweets in this time of economic anxiety. Hershey recently noted that consumers turn to its chocolates for stress relief, and Kellogg reported double-digit growth in snacking.

Plus, private label has certainly seen growth in this inflationary environment as consumers have sought lower-priced options. Brands and retailers ranging from Coca-Cola and Colgate-Palmolive to Albertsons and Target competitor Walmart have been noting this trend in the past couple of months.

The latter has been pushing its private-label goods to consumers while pushing back on suppliers’ continually increasing prices.

Rod Little, chief executive of Edgewell Personal Care, told Reuters earlier this month that Walmart shared the following message: “From here, our consumer is challenged, we’re going to be looking out for consumers, so you’re going to have to have really good reasons if you’re going to price up from here.”

In an interview with PYMNTS, Dave Bass, managing director of FreshDirect, an Ahold Delhaize-owned online grocery delivery service that serves six East Coast states and districts, noted that Ahold Delhaize’s brand Nature’s Promise has been growing “at a very high rate, more so than we even expected” and that, as such, the eGrocer intends to expand the brand going forward.

U.S. Bureau of Labor Statistics (BLS) data reveals that grocery prices increased 11.3% year over year in January. Plus, consumers feel the impact of this inflation even more acutely, according to data from PYMNTS’ study “Consumer Inflation Sentiment: Perception Is Reality,” which found that consumers estimate grocery price increases to be more than twice the BLS-measured rates.

The report, which drew from a survey of more than 2,100 U.S. consumers in December, revealed that 69% of consumers have made changes to their grocery shopping lists in the last year in response to rising prices. Fifty-nine percent have reduced the quantities of items they are purchasing, and 35% have reduced the quality.