What does the future look like for private label?

To survive in the dog-eat-dog world of retail, retailers are required to rapidly evolve and adapt to an ever-changing and competitive environment. One of the ways this has been achieved is through the introduction of private label brands.

With more consumers expressing that the balance of quality and price of private label products works for them, increasing numbers of retailers are introducing them as an effective way to improve consumer loyalty and achieve differentiation. What’s more, with 85 percent of retailers claiming that ‘improved margins’ was their main reason for investing in private label, it appears that stocking these products is also a key way to boost profitability[1].

As more and more consumers are willing to make the switch from big name brands, looking forward, there is no doubt that continued growth is on the cards for private label!

Global growth

Whilst private label has been steadily evolving (and thriving) in Europe for some time now, the US has lagged behind. However, according to Nielsen, by the end of 2017, private label brands earned ‘dollar growth’ of more than triple the rate of national brands.[2]

US Online retailer Thrive Market is a key example of a company that has taken advantage of the consumer shift towards private label by developing ranges that are most likely to generate significant volumes. The retailer has evolved into an online destination for people looking for organic and natural products. As stated by co-founder Gunnar Lovelace; “Private label is a core part of our strategy and it’s accretive, so it doesn’t cannibalize sales of the brands we offer”.

This is a similar story in Australia where retailers such as Coles are beginning to jump on the private label bandwagon. The grocery store aims to have private label make up 40% of their product range over the next five years.[3]

The introduction of private label products also provides an opportunity for countries that are experiencing economic turbulence, in addition to providing new opportunities for developing countries. Essentially, regardless of the market, going forward, private label brands will have several avenues for growth around the globe.

Adopting the latest trends - for survival

For private label brands to gain momentum and thrive in the future, not only must they focus on delivering high quality products that are good value for money, it is essential that they keep their finger on the pulse of the up and coming retail trends. Some key examples include:

Eating trends- the wellness movement

British supermarkets Sainsbury’s and Tesco, for example, have recently launched private label vegan ranges, in response to the widespread shift towards leading a healthier, more plant based lifestyle. This is a similar story for Italian supermarket Crai who experienced particular success with the launch of their health-focused private label ranges. Since fresh produce like fruit, vegetable, fish, meat and dairy are typically commodities, there is undoubtedly room to grow for private brands in this area. Crai have recognised this and are consequently set to expand their ‘fresh’ private label brand later this year[4].

Convenience cooking- meal kits

Meanwhile responding to the consumer demand for quick, easy yet nutritious food, US retailer Kroger has reaped the benefits by offering their private label Prepared meal kit line. The line, which offers people simplicity and speed whilst using healthy ingredients, is set to roll out to an additional 200 stores across the states this year.

Demand for premium

With the majority of private label growth coming from premium ranges, consumers are seeking excellent quality at an affordable price.[5] In a recent statement, Matt Sargent, senior vice-president of retailer for Magid, confirms this stating, “Any retailer that doesn’t have a premium private label brand is in danger going forward”. This was confirmed in a recent study undertaken by Trace One, which revealed that 43% of consumers buy premium.

When it comes to appealing to the highly coveted millennial generation, for example, offering high quality private brands is key, as they stay well informed about brands, including store brands and where their food comes from.

As mentioned in an earlier blog article, millennial consumers should be a key target market for retailers’ stocking private label as they are more willing to try emerging brands and are less loyal to traditional name brands.

With more tools and networks (like Trace One) becoming mature and accessible (thus making it easier to develop Private Label products), there is no doubt that the future is bright for private label brands. In the meantime, however, it is crucial that they don’t become too complacent. Staying alert to the aforementioned new trends and constantly adapting to the changing retail landscape and the demands of the consumer will increase the likelihood of long-term success. After all, private label brands are critical to a retailer’s value image, supporting margin and profitability.