The Supply Side: Walmart rolls out new private brand Bettergoods

Walmart has a long history with private brands, offering over 29,000 products in 20 categories since 1983. Among these is the Ol’ Roy dog food brand, named after Sam Walton’s English Setter and first produced by Simmons Foods in Siloam Springs.

Walmart recently launched Bettergoods, its most significant private brand in 20 years in the food and consumable categories, as part of its strategy to lower prices and capture market share. The brand launch came as Walmart reported that its private brand market share continued to increase.

Chief Financial Officer John David Rainey recently told investors that over the past year, more than half of all customer grocery baskets contained a private brand.

In the past 12 months ending on Jan. 31, Walmart said 26.4% of its total grocery sales were from its private label offerings. Consumer insights firm Numerator reports Walmart owns four of the top five private brands ranked by household penetration with Great Value at 72.7%, Equate at 52%, Marketside Fresh at 44.2% and Fresh Guaranteed at 40% of U.S. households during 2023.

In a recent earnings call, Walmart CEO Doug McMillon said that 70% of the Bettergoods items are priced below $5.

“This is the type of quality and value that will resonate with customers across income spectrums,” McMillon added.

Consumers can expect the brand to offer products in various categories with prices ranging from under $5 to $15. The brand includes:

• Seasonings for around $3.
• Specialty soups like Creamy Corn Jalapeno Chowder for under $4.
• Sauces like Bronze Cut Pasta for $1.97.

The retailer said the product rollout will be fast, and many of the items, from ice cream to mac and cheese, are already out in stores and available online.

CONSUMER REACTION
Several years ago, Walmart boosted its Great Value ice cream category investment. A report from Numerator found that 39.5% of Bettergoods shoppers purchased the ice cream for its flavor, and 38% said price drove their purchase. Around 31% purchased Bettergoods ice cream based on its nutritional facts. Numerator found that the new brand appeals to low- and high-end income groups.

Bettergoods appealed to low-income households, who were 34% more likely to purchase the new brand. High-income households are 20% more likely to choose Bettergoods than Great Value.

Numerator said the bifurcation suggests the brand can appeal to lower-income consumers who want to treat themselves while also providing higher-income consumers with a product that goes beyond basic needs at an affordable price.

Although early, Bettergoods’ performance is promising. Numerator reports that 78% plan to repurchase the brand on their next ice cream trip, and 46% find it to be a better value for the money compared to other ice cream brands. Also, 37% of buyers say Bettergoods is healthier than other brands, and 34% believe it has higher-quality ingredients.

Numerator said Bettergoods ice cream is more expensive than Great Value but less than leading name brands. It also gives consumers a chance to trade up and still save money.

Because Bettergoods fits three major food trends — culinary-inspired, plant-based and made without — analysts believe the brand will find its way into households at all income levels, which could be problematic for competitors.

Numerator also warns that Walmart’s Bettergoods brand cross-sells into other categories as 63% of shoppers said they are likely to purchase other food products. Should Bettergoods continue to expand to the level of Great Value, Walmart could see gains at the expense of name brands and competing retailers, the report noted.

Fayetteville-based Field Agent also recently surveyed consumers about their impression of the Bettergoods brand. That survey found that 75% of consumers were unaware of the new brand until they got their survey assignment. Among those who had heard of the brand, only 35% had tried it. The overall impression of the brand at first glance was positive.

Respondents to Field Agent’s survey found Bettergoods ice cream packaging, ingredients and pricing as good (49%), excellent (25%), fair (23%), poor (3%) and very poor (1%). Field Agent also asked respondents to compare the quality of Bettergoods ice cream with other brands. Quality was mixed with 46% who thought it was better, 51% who saw it as the same and 3% who didn’t like it.

The primary distinguishing factor of the Bettergoods brand was affordability among 35% of Field Agents’ respondents. Also, 53% of respondents said Bettergoods will likely enhance their customer loyalty to Walmart. As an indicator of future performance, Field Agent found that 42% said they would probably buy the brand, and 23% definitely intend to.

COMPETITOR REACTION
Scott Benedict, a contract partner with retail consulting firm McMillanDoolittle, said Walmart’s private brand expansion likely involves providing a higher-quality product for consumers who want something more without spending a lot more.

The release of Bettergoods follows Kroger’s Smart Way private brand, launched in September 2022. The grocery giant said in March it planned to add more than 800 items to its private-label products as more Americans prepare meals at home instead of eating out. Numerator reports Walmart maintained a 72% private brand market penetration last year, but Smart Way was the fastest-growing in the grocery market.

“We expect consumer sentiment to improve in 2024, but our customers will still have to manage many of the same macro pressures as last year,” Kroger CEO Rodney McMullen said in a recent earnings call.

Target also recently announced plans to lower prices on 5,000 frequently shopped items. The price reductions will take effect this summer.

“Consumers will enjoy savings on everyday items such as milk, meat, bread, soda, fresh fruit and vegetables, snacks, yogurt, peanut butter, coffee, diapers, paper towels, pet food and more. These price reductions will collectively save consumers millions of dollars this summer,” said Rick Gomez, chief food officer at Target. “We know consumers are feeling pressured to make the most of their budget, and Target is here to help them save more on their everyday needs.”

Target’s private food brands, Good & Gather and Everspring, are among the items with price cuts of around 5% and 9%, respectively. Target said it also works with brands like Clorox, Purina, Kimberly Clark and Pepperidge Farms to lower prices.

Benedict said Bettergoods is a way Walmart can retain some of the higher-income shoppers it has attracted in recent years. He does not see the new brand taking share from Great Value. The Bettergoods brand targets younger, more affluent, trend-oriented consumers looking for vegan options and specialty ingredients with matching packaging.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.