10
TO WATCH IN 2024
BY GREG SLETER
Each year brings with it a new set of challenges for the nation’s retailers, and 2023 was no exception. While high prices were a hot topic, consumers continued to navigate this challenging environment to find the products they wanted and needed, with more turning to private brands. As 2023 comes to a close, Store Brands has put together its 10 Retailers To Watch. Our list covers grocery, department stores, and mass merchants among others that each have opportunities for growth while facing new challenges. The profiles of the 10 retailers will provide you an overview of each along with our thoughts on why each is worth watching in 2024.
HERE ARE THE RETAILERS YOU SHOULD KEEP AN EYE ON IN THE NEW YEAR
Select a retailer to explore.
OVERVIEW It was a busy 2023 in the U.S. division at Aldi. Topping the headlines was the grocer’s acquisition of Southeastern Grocers’ Winn-Dixie and Harveys Supermarket banners during the summer. The deal, which is expected to be complete during the first half of 2024, includes approximately 400 stores in Florida, Georgia, Mississippi, Alabama, and Louisiana. The SEG deal was announced during a year when Aldi was also growing organically. Weekly announcements of new store openings – and some store remodels – have been commonplace as the discount grocer expands its footing across the U.S. WHAT TO WATCH The retail grocery industry will be closing watching how Aldi absorbs the Winn-Dixie and Harveys stores with numerous questions yet to be answered. How many will convert to Aldi? How many will keep their current brands? How many will close? And what about the broad selection of private brands that Aldi and the SEG stores carry? How will those own brands be integrated? More to come as the acquisition is completed. Additionally, Aldi shows no signs of slowing down its organic store expansion. Throughout the year, the grocer has entered new communities and expanded in others it has served for years. Starting the year, Aldi had plans to open 120 new stores nationwide, which if reached would give the company more than 2,400 locations. Will this momentum continue in 2024? What is clear is that Aldi’s growth has mirrored the growth of private label product sales in the U.S. While inflation has been the key driver, more consumers have tried private label products as they look to save money. What they have found is not only high value, but high quality. With Aldi continuing to offer a double-your-money-back guarantee on its products, more consumers are likely to give their brands a try.
MENU
Home
ALDI
CASEY'S
DOLLAR GENERAL
JCPENNEY
LIDL
MACY'S
PET SUPPLIES PLUS
RITE AID
SPROUTS FARMER MARKETS
TARGET
Previous
NEXT
OVERVIEW Convenience stores across the U.S. continue to make gains with consumers, most notably the younger generations, who are seeing these retailers as more than just a quick stop for a beverage and bag of chips. Seeing this opportunity for growth, and the need to differentiate from retailers of all shapes and sizes, Casey’s General Stores is in growth mode. Part of the company’s three-year strategic plan is continued growth of its private label offerings. As with other retailers, Casey’s focus is on providing its shoppers own brand products that offer high value and quality that equals or exceeds similar national brand products on their shelves. WHAT TO WATCH With a limited footprint in its stores, choosing the categories for growth will be an interesting watch at Casey’s as the company builds off its base of more than 300 snack and beverage options sold under its own brands. With a store brand penetration rate of about 9%, there is room to grow. What’s interesting to note with Casey’s strategy to date is the retailer has positioned some products as “premium” while also using its own brand in categories that may not be top of mind in the convenience store space. For example, its Up water is positioned as a premium product in the crowded bottled water segment, and there’s a selection of pint-size ice cream sold under the Happyness By The Pint store brand. With a foundation of success, there is clear opportunity to develop new private label assortments while building off of current lines. The retailer is also able to use the high level of trust its customers have, thanks in part to its popular fresh-made pizza, which is often ranked as one of the top pizzas sold by retailers. "Our customers know us for our high-quality pizza that we make from scratch, so we know that anything we put the Casey’s brand on absolutely has to deliver on quality,” Tom Brennan, chief merchandising officer with Casey’s, previously told Store Brands.
OVERVIEW Dollar stores such as Dollar General continue to gain momentum as more Americans are turning to their neighborhood discounters for a variety of needs from frozen food to pet food and even cosmetics and health and wellness products. This growing demand is seen not just with store count, but investments Dollar General has made to its supply chain network. In August, the company celebrated the grand opening of its dual distribution center in Blair, Neb., which offers the efficiencies of traditional and DG Fresh supply chain functionalities. Days earlier, the retailer announced it was constructing a new distribution center in North Little Rock, Ark. WHAT TO WATCH With new and forthcoming enhancements to its distribution network, Dollar General appears to be positioning itself to supply its stores with food and fresh produce with greater frequency. The small footprint of its stores presents a challenge to offering a deep product assortment and could lead to out of stocks if consumer demand remains strong. During 2023, the retailer has expanded its assortment of food, meeting a need for a growing base of shoppers that have sought its money saving options. Among the notable additions was with the expansion of its Clover Valley private brand. The more than 100 items added included a selection of sauces, condiments, entrees, sides, and snacks at affordable prices. In announcing the expansion earlier in the year, Emily Taylor, Dollar General’s executive vice president and chief merchandising officer, said, “We have made significant enhancements to our private brands in 2023, and we know how important these value offerings are to our customers.” As we move into 2024, it will be interesting to watch how Dollar General further enhances its private label offerings, both in consumables and elsewhere throughout the store, especially as its customer base continues to grow.
OVERVIEW The department store channel clearly is not what it once was. But those that survived the consolidation and downsizing over the past quarter century today have a place in the American retail landscape. One of those is JCPenney. The venerable department store retailer is on the rebound, with a leadership team focused on finding the right balance between modernizing its stores and product assortment while also meeting the needs of its core middle-class customers. And a major tool in its toolbox is its collection of private label products across the store. WHAT TO WATCH The past year has seen a resurgence at JCPenney, and there are signs that its effort to overhaul its products and find the sweet spot between being trendy while offering value to consumers is working. During 2023, the retailer unveiled new apparel lines from Jason Bolden and found inspiration from the popular television show “Abbott Elementary.” Additionally, it expanded its only at JCPenney push in home with the debut of a new housewares collection from Chef Jenny Martinez. In an interview with Store Brands, Michelle Wlazlo, the retailer’s chief merchandising officer, said JCPenney is focused on refining its brand and pleased with its progress. “Our goal is to provide our customers with a wide assortment of affordable, inclusive brands through both our private and beloved national brand partners,” she said. Worth watching in 2024 is the success of those private label collections launched in 2023, and what is in the pipeline for the New Year. We’ll also be watching how the company moves forward with its previously announced $1 billion investment. By fiscal 2025, JCPenney plans on using the funds to enhance its digital capabilities, and upgrade in-store physical, technology, and merchandising operations. How these upgrades benefit the retailer and its customers will be vital to future growth and the success of the long-standing department store.
OVERVIEW It’s been an interesting year for Lidl. The European discount grocer has gone quiet to a large extent, closing some stores while opening others, but doing both with little communication to its customers or the media. When the company began expanding across the eastern portion of the U.S. several years back, it did so with some flair. Today, the retailer is mainly quiet as it maintains its presence in hundreds of communities. Lidl, best known for its broad assortment of private label products, has hit the brakes on store expansion at a time when sales of store brand products are growing. WHAT TO WATCH Lidl’s U.S. division will start the new year with a new CEO, Joel Rampoldt, who took the leadership position in September from former CEO Michal Lagunionek. No reason was given for the change, but the CEO swap in August came after media reports surfaced of several Lidl store closures on the east coast. But there remain many questions regarding Lidl. What are the challenges facing Lidl? Will the grocer look to reinvigorate its store expansion plans? What new markets are on the company’s radar? While the grocery marketplace remains highly competitive, on the surface it does appear that Lidl has an opportunity to make additional inroads with consumers in the U.S. that are seeking quality, private label products. The retailer’s broad private label assortment is a solid mix of value priced items along with products that could be considered premium, but are far less expensive than similar national brands. As we move into 2024, we’ll be watching Lidl closely. They have played a key role in recent years in raising the profile of private label products. And the on-going demand for quality, high-value products from shoppers should provide the grocer an opportunity to expand its reach into additional markets.
OVERVIEW Another of America’s long-standing department stores took several steps to evolve its business model this year, and private brands were at the forefront of Macy’s efforts to differentiate itself from competitors. Its biggest splash came in July with the launch of its On 34th private brand collection. Featuring more than 750 SKUs and more than 250 unique styles, prices in the line range from $18.50 to $299.50 with sizes ranging from XXS to 4X and 0 to 26W. Officials with the retailer reported early success with the new line. WHAT TO WATCH Macy’s continues to be a premier marketer, with its brand maintaining a high profile position through the annual Thanksgiving Day parade and July 4th Fireworks show in New York. This puts the Macy’s name in front of consumers of all ages, which is a positive when working to build brand recognition with younger shoppers. Ultimately, Macy’s success will come down to its product assortment. In 2023, we’ve seen the department store retailer once again up its game with a focus on private brands, a strategy that historically has been successful for the retailer. Beyond apparel, the company this past year also debuted its exclusive Shash Diné Hotel Collection, a limited edition array of home pieces. It’s likely that more new private label collections are in the offing in 2024. Additionally, Macy’s will have a new leader come February as Tony Spring will officially take the president/CEO role from the retiring Jeff Gennette. Sliding over from Bloomingdale’s, Spring brings with him more than 35 years of experience at the high-end department store. Known for his ability to build brands and identify talent, Spring has an opportunity to put his stamp on Macy’s and continue the department store’s evolution, which includes opening smaller store formats.
OVERVIEW The pet products category has seen a great deal of private label growth over the past year. Similar to the mindset employed when expanding assortments focused on humans, retailers are also growing their pet private label selections to bring value to shoppers that provide points of differentiation in an ever-crowded marketplace. This tactic has been key to growth at Pet Supplies Plus. During 2023, the retailer debuted new items to its OptimPlus own brand. Additionally, the company is in a growth phase with commitments for nearly 300 new and existing franchise stores to open in the future. WHAT TO WATCH As Pet Supplies Plus continues to grow, it will be interesting to watch how this expanding retailer elbows its way through a crowded landscape that includes big box pet retailers, mass merchants, dollar stores, and supermarkets each of which is looking for their piece of the lucrative pet products business. Differentiation will be key, and private label products will play a role in the retailer's on-going effort to give shoppers a unique product selection for their beloved pet. In an interview with Store Brands earlier this year, company CEO Chris Rowland, said, “Building strong private brand offerings allows us to stay in touch with our neighbors and react to their needs because we develop the products ourselves. We are also providing high-quality, lower-cost options to ensure we’re giving our store owners and neighbors the very best value.” As the company builds its private label mix, it does so with a strong foundation that includes a host of own brands including Redford Naturals, OptimPlus, Mitten’s Morsels, Mitten’s Pickins, Hartwick Fields, and the newly launched Wixom Ranch Natural Chews. Rowland noted while some shoppers initially converted to store brand products to offset higher prices from national brands, they have continued to buy the items as they like the quality and value offered. This bodes well for future growth.
OVERVIEW Rite Aid will start 2024 working its way out of Chapter 11 bankruptcy protection. The struggling drug store chain filed for bankruptcy in October and in the weeks following announced numerous store closures. With a commitment of $3.45 billion in financing from lenders, the retailer is closing out the year working on a plan of action to keep the doors open, and doing so under the guidance of its new CEO Jeffrey S. Stein. WHAT TO WATCH Well, there is a great deal to watch as it pertains to Rite Aid and its future. As the company gets its finances settled and right-sizes its store count, one question that will need to be answered surrounds the retailer maintaining and re-establishing its place in the retail landscape. Direct competitors CVS and Walgreens maintain their respective store counts that number in the thousands, and numerous other retailers are expanding their assortments of health and wellness products while also offering pharmacy services. Once the financial challenges are dealt with, the drug store chain will need to re-engage with consumers and highlight how they differ from the competition. Private label could provide that solution as Rite Aid looks to freshen its front-end product assortment. The retailer is no stranger to developing its own brands. More recently, it launched the RYSHI beauty and personal care brand that includes more than 300 products such as body wash, razors, face and eye masks, and shower accessories. Rite Aid also launched its Ello Market line that includes snacks, pantry essentials, and treats offered in three categories — Core, Better For Your, and Indulgent. Should Rite Aid look to further expand its private brand mix, that opens new opportunities for suppliers in a host of categories.
OVERVIEW Looking for a single word to capture the current state of business at Sprouts Farmers Market? Growth. The healthy grocer best known for its assortments that offers shoppers a multitude of organic, plant-based, and gluten-free products is on a growth trajectory that is expected to see the retailer opening an additional 40 stores in 2024. This year, Sprouts celebrated the opening of its 400th store and financial results show consumers across the country are taking to the retailer's healthy-living focus. WHAT TO WATCH Sprouts currently has stores in 23 states, but a majority of those locations are concentrated in only five states. There will be additional pressure on its supply chain and the response from shoppers in new communities to the grocer’s unique product mix will be of interest. A key component of Sprouts growth will also be its ever-expanding assortment of private label products. In 2023, the company surpassed the $1 billion mark, a significant milestone for a retailer whose total revenue in 2022 was $6.4 billion. With more consumers seeking products that allow them to live a healthier lifestyle, be that consumables or personal care products, Sprouts has maintained an aggressive product development posture. The company continues to bring to market new private label products and consumers are responding positively. Sprouts reported a 14% jump in sales across the Sprouts Brand assortment in the third quarter of fiscal year 2023. Company officials said the continued focus on innovation and differentiation is setting it apart from competitor food retailers. “The value of the Sprouts Brand resonates with our core customers, as we continue to receive recognition and rave reviews,” said Chip Molloy, the grocer’s chief financial officer.
OVERVIEW Simply put, Target is an enigma. Throughout 2023, the retailer has been challenged by consumer economic headwinds and issues such as shrinkage that have combined for unimpressive results to its top line and bottom line. While the company has seen growth in categories such as beauty and same-day services, it was not enough to offset softness in discretionary product categories. This was a common theme at the retailer through the first three quarters of 2023. The silver lining in the company’s financials has been growth in net earnings and earnings per share. WHAT TO WATCH Despite its challenges, Target continues to develop new ways to enhance the shopping experience of its guests. The new Ulta store-within-a-store concept is eye-catching and could be the foundation of future retail partnerships. The other tactic often employed by the Minneapolis-based retailer is differentiation and private label remains the heart of that strategy. And with private label products accounting for $30 billion in sales annually, there will be more to come in 2024. Throughout 2023, the company has continued expanding on existing own brand lines and debuted others. The most recent was Figmint, a broad housewares assortment the retailer said combined fashion and function with high value. While products in the line offer nothing revolutionary, it does give consumers another option when shopping for new kitchenware. Additionally, sustainability has been a significant focus for Target as it continues evolving its store brands. Its Target Forward initiative aims to have private brand plastic packaging, recyclable, reusable, or compostable by 2025. This is on top of the effort to have the products themselves be sustainable. To make this happen, the retailer is partnering with stakeholders to build out responsible sourcing guidelines for key materials and ingredients.
