Brands Looking over their Shoulder at Private Label Goods

By Rose Anthony

The race for the wallets of shoppers continues with national brands vs. private label packaged goods. There’s growing evidence that store brands are catching up.

In a blog on the website of the Food Marketing Institute, Doug Baker wrote, “Private brands have become full-fledged brands in their own right, as evidenced by 69 percent of consumers saying it’s very or somewhat important to have a good assortment of private brands in food and beverage.”

Baker, the Vice President, Industry Relations - Private Brands, Technology, at FMI, noted that based on the current momentum from consumer acceptance, the private brand dollar share could double from the current 15 percent average to almost 30 percent in the next 10 years.

A recent study from Cadent Consulting Group points to “brand-agnostic Millennials” as driving sales of private label brands; in fact, the report predicts that store brands could “steal” as much as $64 billion from national brands over the next decade.

“Millennials will grow to represent the largest percent of purchasing power over the next decade, and they are more receptive to private label products than baby boomers,” the report stated.

But marketers of national brands might have something to say about such growth at their expense.

“When brands are being innovative, when brands are doing what they are supposed to do – that is creating differentiation – brands can win,” said Eric Rosenstrach, President and CEO of Fuel Partnerships, a retail marketing agency based in Boca Raton, Fla.

“Brands are providing something that private label can’t,” he said. “Brands have beaten other brands by out-innovating them with such things a convenient packaging, convenient preparation, and flavors; that is, everything that has made great brands great. If that continues, brands will always be ahead of private label.”

Meanwhile, consumers want private brands that push the envelope and connect with them, according to speakers at the last Private Brands Summit, held in conjunction with FMI Connect.

FMI President and CEO Leslie Sarasin said supermarket retailers have a unique opportunity to help shoppers navigate the aisles, especially regarding their attitudes around wellness. She said the opportunity exists to mirror the lifestyles and aspirations of shoppers through private brand offerings; that is, to transition from selling to customers to inspiring them.

Sarasin pointed to three action steps for retailers:

  • Focus on the customer: When developing a private brand, the focus should be on consumer lifestyle. It’s key to take advantage of the opportunities that consumers create for a private brand, such as wellness.

  • Focus on an experience: Private label should offer an experience. Retailers should take store brand products throughout the store.  For example, rethink a coffee display in the aisle by creating a café experience for on-the-go shoppers.

  • Focus on a new definition of value: Shoppers want private brands to be about more than a low price or a mimic of national brands. They want private brands to differentiate themselves from mainstream brands and offer more. What does a private brand stand for? How does it align with a shopper’s value system?

Rosenstrach points out another factor. Retailers are reducing the number or brands on the shelf in in some categories from, say, eight brands down to three – and private label is one of them. 

What should brands do? One thing, he said, is to shorten the production cycle from idea to shelf.

“We used to say it takes a year to develop a new product,” he said. “Those things have to happen faster. You have to get from innovation and idea to commercialization much faster today because trends change quickly and the fact that private label is coming up behind you. If you don’t get in front of it fast, how long can you hold on to exclusivity before private label starts to engage?”

                                                                           February 2019
Tell a friend about this page
  • You'll be notified by email when new issues are published
  • You'll get a special link that takes you directly to the current Home Page
  • You'll receive special reports targeted to your area(s) of interest
  • It's FREE and it's EASY -- just click here to sign up now