May 19, 2023
Private label brands are products that are manufactured by one company and sold under another company’s name. They are also known as store brands, own brands, or retailer brands.
Private label brands have been gaining popularity in the food and beverage industry due to several factors, such as rising inflation, cost-of-living crisis, consumer preference, and innovation.
According to a report by the Private Label Manufacturers Association (PLMA), U.S. grocery store private brand dollar volume rocketed 10.3% in the first quarter of 2023, nearly twice the 5.6% gain of national brands compared to a year ago.
Private label brands have capitalized on the cost-of-living crisis to make up 38% of total grocery sales in the UK, while national brands have seen a 16% fall in new product launches. In Australia, private label brands account for more than 30% of supermarket sales and are expected to grow further.
One of the main reasons for the rise of private label brands is the increasing price gap between them and national brands.
As inflation and commodity costs soar, national brands have been raising their prices to maintain their margins, while private label brands have been able to offer lower prices and better value to consumers. For example, a 400-gram block of Aldi private label cheddar costs about 2.29 pounds ($2.70), while a similar-sized block made by Cathedral City, Britain’s biggest cheese brand, costs more than 4 pounds. Similarly, a 12-pack of PepsiCo’s Mountain Dew costs $5.49 at Walmart, while a 12-pack of Walmart’s Great Value citrus soda costs $2.58.
Another reason for the success of private label brands is their ability to cater to consumer preferences and needs.
Private label brands have been investing in innovation and quality improvement, offering products that match or exceed national brands in terms of taste, nutrition, and variety. For example, Kroger’s Simple Truth brand offers organic and natural products that appeal to health-conscious consumers, while its Private Selection brand offers premium and gourmet products that compete with specialty brands.
Private label brands have also been quick to adapt to changing consumer trends, such as plant-based, gluten-free, keto-friendly, and ethnic foods.
Moreover, private label brands have been benefiting from the loyalty and trust of consumers who shop at their stores. Private label brands can leverage their store data and customer insights to create products that meet their specific needs and preferences.
They can also use their store environment and marketing strategies to promote their products and create a strong brand identity. For example, Trader Joe’s is known for its unique and quirky products that reflect its adventurous and fun personality, while Whole Foods is known for its high-quality and sustainable products that reflect its ethical and environmental values.
In conclusion, it is anticipated that private label brands will proceed with their expansion and maintain their dominant position in the market for food and beverages in 2023 and beyond.
Consumers who are experiencing inflation and cost-of-living pressures have been able to benefit from them by receiving lower prices, better value, higher quality, more variety, and stronger loyalty from these companies. In addition to this, they have been successful in competing with and surpassing national brands in terms of innovation and differentiation. Many customers are starting to favour store brands over national brands as their go-to option, elevating private label brands above the status of mere alternatives or substitutes.
July 26, 2022
