Food brands studied in L2’s Index are expanding their distribution network to include grocery e-tailers. However, they are disadvantaged by e-tailers’ preference to promote their own private label brands at the expense of Index brands.
For example, Kroger invests heavily in its private label products and owns 32% of total SKUs on its website. Other retailer SKUs are less skewed: Walmart Grocery owns 16% of its products and Peapod owns just 6%. However, brands need to actively promote their products to gain visibility as private labels take up more shelf space, and are usually placed in the first page of search results.
Kroger offers food brands few opportunities for merchandising, but brands should invest in sponsored products or ads on other retailers to avoid becoming invisible. Johnsonville’s featured product on Walmart Grocery appears below a large headline ad for a private label alternative, and Dannon Oikos has bought its way onto the page with banner ads on Fresh Direct.