Walmart is debuting a new grocery brand, as the discounter tries to retain the shoppers it has attracted during a period of high inflation.
On Tuesday, the big-box retailer said it will roll out a private label called Bettergoods, a line of more trend-and chef-driven foods. Most items will be priced at less than $5.
The company decided to develop the new line after shoppers indicated they wanted "elevated culinary, inspirational types of items" and healthier foods like plant-based products, said Scott Morris, senior vice president of private brands, food and consumables for Walmart U.S., in an interview with CNBC. He said the retailer designed Bettergoods for all customers, but expects it to especially appeal to younger and more affluent shoppers that it's attracted to its stores over the past few years.
Walmart is already the country's largest grocer by revenue. Nearly 60% of the company's sales in the U.S. came from its grocery business in the most recent fiscal year. It declined to say how much of its grocery revenue comes from private label. But at its warehouse club Sam's Club, private label drives about 30% of sales.
Walmart's large food business has helped it drive store and online traffic, especially as customers have watched their discretionary spending during a time of high inflation. And its low-priced reputation has helped the company attract higher-income grocery shoppers as inflation pinches budgets.
In the most recent fiscal year that ended in late January, Walmart's net sales for groceries in the U.S. rose nearly 7% year over year to $264.2 billion.
But Walmart, like other grocers, has seen room to grow its private-label business as shoppers seek new flavors and lower prices. During the Covid-19 pandemic, some national brands' products ran low at stores and caused customers to start buying the retailers' own brands.
Later, inflation pushed prices of food and housing higher and inspired more shoppers to try store brands, which are often cheaper. Plus, the growth of low-priced grocery chains like Aldi, Lidl and Trader Joe's — which prominently feature their own private labels rather than national ones — and the popularity of Costco's Kirkland has changed customers' perception of store brands.
Grocers have also overhauled their private-label approach. Instead of relying on basic items like canned peas or copycat items like a lower-priced box of cereal that resembles Cheerios to make up their store brand, retailers began debuting more unique food items.
For example, Target launched a new grocery brand called Good & Gather in 2019 with a wide range of items including bagged salad kits, peanut butter spreads and frozen veggies. Another grocery brand it debuted, Favorite Day, is made up of creative takes on ice cream bars and trail mixes.
Other retailers have introduced new private brands in their grocery aisles focused on affordability and fending off discounters like Aldi or Dollar General. Kroger, for example, launched Smart Way two years ago. The brand offers low-priced basics like mayonnaise and sliced bread.
Walmart's new grocery brand, Bettergoods, will be made up of items across many categories including frozen foods, dairy and snacks ranging from under $2 to under $15. The products will fit within one of three major areas, the company said: items with more of a culinary flair, such as a jarred creamy corn jalapeño chowder; items that are plant-based, such as a pint of oat milk nondairy ice cream; or items that exclude certain ingredients, such as gluten- and antibiotic-free chicken nuggets.
Bettergoods will join Walmart's existing collection of private brands in the grocery department, which includes Great Value — the country's most popular private grocery brand based on the percentage of households that have made a purchase in recent months, according to Numerator, a market research firm.