‘An advantaged situation’
While no one would argue a pandemic was somehow all worth it, many trends associated with COVID have played to the advantage of national brands, experts said. In many cases, brands were less affected by supply chain chaos than private brands, and also benefited from stimulus-rich shoppers “trading up.”
Brands tend to characterize those effects slightly differently. “During COVID, consumers demonstrated their preference for brands that they know and trust,” said Mondelez International CEO Dirk Van de Put, during the company’s investor day in May. Many brands also point to strategic moves taken before or during the pandemic meant to help them withstand cheap competition, and better harness innovation and marketing, to communicate value.
General Mills Chief Financial Officer Jonathon Nudi told analysts last month that private labels today compete with only 10% of General Mills’ current portfolio categories compared with 18% penetration in all categories. Mondelez has focused on categories for which private brands have failed to gain traction, such as chocolate, which according to Van de Put had declined to 5% private-brand penetration.
General Mills’ strategy includes developing brands on the leading edge of trends that, when mature, would give it a head start in categories difficult to replicate. One example is Bold Cultr, an “animal-free” cream cheese brand now being test marketed. The company is also getting rid of brands for which it does not see a future. (It recently sold off its Helper and Suddenly Salad brands.)
Kraft Heinz Co. has reduced private-brand exposure from 17% a few years ago to about 11% today, Carlos Abrams-Rivera, executive VP and president, North America, said during an April earnings call. “It certainly puts us in an advantaged situation,” Abrams-Rivera said, according to Sentieo transcript.
One way Kraft Heinz reduced its exposure was by cutting loose some significant brands and categories it perceived as vulnerable to private label—most notably, its Planters-led nut business. Meanwhile, a more focused portfolio and consumer insights work allowed Kraft Heinz to creatively recharge some items that might be seen as easy marks for private label, such as Philadelphia cream cheese or Kraft Mac & Cheese, by tapping into emotional appeal that knockoffs cannot.