Private label has been around for decades, but the caliber and breadth of items available today are a far cry from the Brand X macaroni and cheese in plain white boxes in the value sections of 1970s supermarkets. The near future should bring even more excitement, with such emerging players in the U.S. market as German deep-discounter Lidl, which proudly touts its mainly private-brand selection as being of superior quality.
As Jim Holbrook, chairman and CEO of Stamford, Conn.-based retail services company Daymon, says: “We are definitely just getting started when it comes to the revolution of private label products. If you look at the headlines, private brands are innovating when it comes to selection, packaging and taste — but they are still finding their stride. Private brands have the true potential to offer solutions across the store — something no CPG brand can do — and we’ll definitely see more of that in 2018.”
To illustrate his point, Holbrook adds: “At Daymon, we recently conducted a survey with shoppers across the U.S. on their perceptions of private brands, and what we found is that six out of 10 shoppers have admitted to buying more store brands over the last couple of years, and large motivators for this are improved quality and variety. As consumers look for more solutions, instead of individual products or brands, private brands are becoming more relevant than ever. In fact, our study also found that 53 percent say they shop at a store specifically for its private brand. This will increase, and will do so very quickly. It’s always a challenge to estimate the true size of the market, but when we look across the industry, we put the size at a minimum of $166 billion in the U.S. Over the past year, private-brand sales have outpaced national brands by about eight times … [up] 4 percent compared to [up] less than 0.5 percent.”
When asked the reasons for this boom in private label growth at supermarkets, Holbrook attributes it to “the result of a perfect storm. Shoppers don’t care about brands anymore; they’d be fine if 74 percent of brands disappeared, and that can be a hard reality to adjust to, but the fact is, shoppers are more excited about private-brand-forward retailers. Because of this, supermarkets are rolling out the private labels in an effort to cater to their customers’ demands as they look for stellar-quality products that are tailored to their lifestyle without being overpriced.”
He’s quick to point out, however, that “this isn’t all about price. Nowadays, shoppers browse the internet to compare products and to see whether they’re being duped or not, and honestly, they’re tired of having their guard up. With private brands, there’s the notion that you’re getting a deal, or at least not paying a nonsensical premium for the name on the packaging, and that’s why these brands are growing so much. It’s just natural selection at work.”
What’s more, he notes that “private-brand products that cater to consumers’ needs are finding themselves well positioned to drive sales and loyalty. Retailers are recognizing this and providing more cross-category solutions with private brands, more seasonal programs, and they are continuing to expand health-and-wellness offerings.”
Asserts Holbrook: “A retailer that truly understands its shopper trading geography can create scale with hyper-personalized brand solutions that distribute in ways that traditional CPG brands just can’t replicate. Add that to the fact that up to 52 percent of shoppers say that they would specifically shop at a store because of its private brands, and that’s all the reason retailers need to dramatically expand private brands on shelves.”
Other industry observers offer similarly rosy assessments of the current private label scene. Describing the state of such products at supermarkets as “very healthy indeed,” Brian Sharoff, president of the New York-based Private Label Marketing Association (PLMA), observes: “Retailers have kept pace with consumers in offering store brands that emphasize organics and natural ingredients as well as creative microwaveables and fresh meals and side dishes. ... While price is always important to shoppers, the expansion of assortment and attractiveness of packaging has given store brands a new cachet.”
Sharoff is of the opinion that “supermarkets themselves are really the major factor causing private label’s growth. While one can cite demographics and marketing, the simple fact is that regional, national, specialty chains and discounters have committed themselves to their own brands as the best way to promote themselves.”
Further, while noting “that consumer perceptions have improved dramatically over the past 20 years, as retailers have invested in quality, packaging, assortment and image of their store brands,” he goes on to assert that “it is more than that: Store brands are responding to consumer trends in ways that national brands have been unable to do. Whether it is ready meals or natural ingredients, ethnic foods or healthier beverages, retailers have carried the banner better than anyone else.”
“The perception of own brands definitely changed over the years, and [they] appeal to shoppers of every tier: value, mainstream, specialty and premium,” concurs Linda Phan, category manager at Elk Grove Village, Ill.-based Topco Associates, a well-known provider of private label products to its food industry member-owners and customers. “It’s not just entry level. Retailers have been doing a great job of responding to customer needs [by] expanding their own-brand assortments into the mainstream and the premium specialty-brand tiers.”
Adds Phan: “We are continuing to see own-brand items respond to the latest trends and excel with unique packaging and brand storytelling. Own brands, now more than ever, are offering items that are better than national brands and available at a competitive price. In the premium-value tier, we are seeing more offerings as well as better differentiation.”
“There is a role for store brands for all incomes and generations — the quality and perception of store brands have shifted over time,” asserts Diane Harper, VP of consumer insights and analytics at Marshall, Minn.-based Schwan’s Co., which last November revealed the formation of Strategic Partner Solutions, a new business unit focused on growing its private label and contract-packing businesses with select retailers and food manufacturers.
Echoing Holbrook, she adds: “Store brands are evolving with innovation, high quality, and health-and-wellness benefits. Consumers are looking for more choices, and those retailers and manufacturers who are adjusting their strategy to meet those needs will see greater success.”
“There is a resurgence of private label brands in grocery with a more ‘differentiated/unique selling proposition’ versus [the] first generation of private label brands that were positioned more around ‘generic brands at the lowest price,’” agrees Howard Kaufman, VP of sales and marketing at Lehi Valley Trading Co., a Mesa, Ariz.-based snack food manufacturer with a core competency in private label. “This resurgence is driven in part by Millennials — now America’s most powerful consumer bloc — who seek quality at a value price, skew more towards better-for-you products and tend to be less loyal to national brands. Additionally, with the increased penetration in the U.S. market of retailers such as Aldi and Lidl … the overall awareness and adoption of private label brands by consumers is increasing.”
• Design a private label portfolio to meet shoppers’ distinctive needs, based on insights derived from customer data.
• Depend on a supplier/manufacturer with a vast array of resources to build a store brand.
• Differentiate through better products, assortment, pricing, promotions, customer service and marketing.
• Deploy such content as unique recipes using key private label ingredients, and instructive newsletters.
• Develop a compelling brand story leveraged throughout multiple consumer touchpoints.