Private Labels Emerge as Unstoppable Brands

Private labels, private brands, store brands, own brands – whatever you call them, they’re one of 2018’s hottest retail trends. Retailers in the U.S. and around the world are investing in private label to stand out with exclusive products that build loyalty.

Update: Exciting 2019 private label stats

• Private-label sales have increased by $7.9 billion across brick-and-mortar stores in the past three years and CPG private label sales now account for 3% of online dollar sales, up from 1.3% two years ago.¹From Household To Hygiene Products, Private Label Is Upending Omnichannel landscape
• According to Food Navigator USA, 85% of consumers are saying that they trust private label brands and 81% are saying that they buy private label products during every shopping trip. Even more convincing, they reported consumers are shifting their dollars accordingly with 53% of consumers say they shop at a store specifically for its private brand.²Shoup, Mary Ellen. More than half of consumers shop at a store specifically for its private brand, says Damon report.
• U.S. mass merchants, wholesale clubs, dollar stores, and military commissaries totaled private brand dollar sales of $60.8 billion last year, up 9.8% year over year, according to Private Label Manufacturers Association.³Redman, Russell. Private Label Growth Spurred By Madd Retailers. April 23, 2019.

---

In U.S. grocery, private label earned sales of $138 billion in 2017, according to Food Marketing Institute (FMI) and IRI®.⁴New FMI and IRI Report Reveals Private Brands Make a Big Comeback. July 11, 2018. Nielsen reports that in the last quarter of 2017 private labels posted dollar growth of more than three times the rate of branded products. Consumers also savored more high-end offerings, as premium private label achieved a growth rate of nearly 11%.⁵Watson, Elaine. Nielsen on private label: ‘We’ve seen a complete reversal in growth trajectory compared to manufacturer branded items.’ Food Navigator-USA. April 5, 2018.

Private label is popular among consumers and companies

As consumers seek ease, convenience, and a personalized shopping experience, private labels can help retailers deliver all those benefits, plus variety. FMI and IRI found that 69% of consumers said it’s important to have a good assortment of private brands in food and beverage.⁶New FMI and IRI Report Reveals Private Brands Make a Big Comeback. July 11, 2018.

Big Food’s “business model of mass production
for a mass market is obsolete.”⁷Olive, David. Why shoppers are losing their taste for Big Food. Toronto Star. May 25, 2018.

Grocery retailers already see a strong consumer shift toward fresh, organic, and natural foods and away from packaged, processed products.⁸Deep Dive: Private Label in US Grocery—Five Drivers of Growth. Coresight Research. October 19, 2017. Consumer tastes have fragmented from mass market appeal to diverse segments that span categories, including vegan, free-from, and local. To reflect demand for health and wellness options, consumer packaged goods (CPG) giants are acquiring smaller brands and reformulating their recipes as consumers seek less sugar, salt, and fat.

It’s not just consumers who appreciate this trend, given the compelling business case for private brands. Retailers use private label to nimbly adapt to changing consumer needs, including healthy food options, sustainable products, and support for local communities. Private label helps retailers gain greater control over their supply chain and profit margins, and establish loyalty, as the products are exclusive to the retailer. This exclusivity can contribute to a competitive advantage, as 53% of consumers use store brands to determine where they shop now (vs. 34% in 2011).⁹Wells, Jeff. Report: Private label grocery sales are a mixed bag for Amazon. Food Dive. July 19, 2018.

Private label shoppers show generational differences

Since different ages can mean different private label needs, there are some notable distinctions among consumer cohorts. For instance, Millennials cite their indifference for established brand names, as 51% have no real preference between private label and national brands, and they will buy private label brands if they think they are as good as multinational brands.¹⁰Pasquarelli, Adrianne. The Millennial Dilemma: The generic generation doesn’t want you. Ad Age. August 21, 2017.
¹¹Greenwood, Chelsea. Americans are starting to shop more like Europeans — and that should terrify Frito-Lay, Coca-Cola, and Kraft. Business Insider. March 10, 2018.

Meanwhile, 89% of baby boomers and 88% of Gen X consumers buy private label because of lower or comparable prices compared with brands.¹² Karst, Tom. The future of private label and fresh produce. The Packer. February 20, 2018. Also, Generation X accounts for 31% of all dollars spent on private brands.¹³ New FMI and IRI Report Reveals Private Brands Make a Big Comeback. July 11, 2018.

Retailers boost private label investments

Major retailers are devoting more resources to the private brands in their assortments. Here are some of their recent private label initiatives.

Amazon

Significant investments in private label by Amazon reinforce that this trend is on fire:

• Variety: Amazon has 80 private label brands, excluding Whole Foods’ 365 Everyday Value brand. Clothing, shoes, and jewelry account for 69 of the 80 private brands.¹⁴ Smith, Cooper. Amazon’s Private Label Fever. Gartner L2. April 3, 2018. Currently, only 2% of Amazon’s private label offerings are in food and beverage.¹⁵Wells, Jeff. Report: Private label grocery sales are a mixed bag for Amazon. Food Dive. July 19, 2018.
  
• Prime Day: This year’s record-setting Prime Day sale highlights included sales records for Amazon’s voice devices, and bestsellers from private labels Stone & Beam, Presto!, Daily Ritual, and AmazonBasics.¹⁶ Prime Members Again Enjoyed the Biggest Global Shopping Event in Amazon History this Prime Day. July 18, 2018.
• Whole Foods: Sales of 365 Everyday Value brand from Whole Foods Market on Amazon totalled $10 million in just three months, with average weekly sales gains of 9%. The 365 Everyday Value brand was consistently the No. 2 performer in sales volume behind Amazon’s main private label, AmazonBasics, during the period, and the fourth most popular brand last year.¹⁷Hamstra, Mark. Amazon tallies $10M in Whole Foods 365 private label sales. Supermarket News. December 20, 2017.
• Voice: Private labels give Amazon a competitive edge among shoppers who use voice technology, as its Alexa voice assistant often recommends Amazon’s best-selling private label products before other brands.
• Pharmacy: To challenge drugstores, Amazon sells (but does not own) Basic Care, an exclusive line of over-the-counter medications and health care items. The company can glean insights from sales data to increase its presence in the pharmacy channel.¹⁸Howland, Daphne. Amazon selling private-label medications. Retail Dive. February 21, 2018.
  
• Pets: This category on Amazon grew more than  40% last year, earning over $2 billion in annual sales, which may have prompted Amazon to create its first private label pet food brand as a value-added benefit available exclusively to Prime members.¹⁹Howland, Daphne. Amazon launches new private-label pet brand Wag. Retail Dive. May 3, 2018.
  

Walmart:

The world’s largest retailer recently launched its own brand of wines, Winemakers Selection, with products from California, France, and Italy.²⁰Sherman, Elisabeth. Did You Know That Walmart, Target and 7-Eleven Sell Their Own Wine? Now You Do. Food & Wine. June 7, 2018. Walmart launched four new private label fashion brands, including plus size and children’s apparel.²¹Petro, Greg. Walmart Vs. Amazon: The Private Label War. Forbes. July 15, 2018.
In addition, Walmart-owned Jet.com launched the Uniquely J line of CPG products, including organic and fair trade coffee, pantry, and laundry items.²²Mohan, Anne Marie. Jet.com launches Uniquely J private brand geared to Urban Millennials. Packaging World. April 23, 2018.
Targeting urban Millennials, the packaging for Uniquely J looks like funky, intricately designed tattoos.

Target:

The cheap chic retailer recently launched a dozen private label brands for home goods and apparel to woo consumers with affordable items with aesthetic appeal.²³Ruff, Corinne. Target launches another home brand in private label push. Retail Dive. June 7, 2018. In addition, Target launched a subscription box service for its popular children’s private label clothing line, Cat & Jack, for convenient home delivery for busy, sleep-deprived parents.²⁴ Statz, Augusta. Target Just Launched A Cat & Jack Baby Clothing Subscription Box. Simplemost. February 20, 2018.

Kroger:

During the first quarter of 2018, Kroger’s own brands accounted for 29% of unit sales and 27% of sales dollars, the highest ever retail dollar share in the company’s history. Kroger’s natural and organic private label brands earned 5% sales growth, led by double-digit growth in its Simple Truth and Simple Truth Organic lines.²⁵Durham, Christopher. Kroger Brands Grew Faster Than National Brands. My Private Brand. June 25, 2018.

Trader Joe’s:

This popular supermarket chain’s loyal following is due in part to its private label excellence. Trader Joe’s private labels account for nearly 85% of the stores’ assortment. The company insists that these private brands remain free from high fructose corn syrup, GMO ingredients, hydrogenated oils, MSG, and artificial colors, flavors, and preservatives.²⁶16 Must-Know Secrets About Trader Joe’s, Straight from a Store Manager. Tasting Table. June 22, 2018.
Its private label sparkling wine just won a PLMA 2018 International Salute to Excellence Award.²⁷American supermarkets win awards for their wines in international competition. Longview News-Journal. July 17, 2018.

Aldi:

Private labels account for 90% of the discounter’s products, and Aldi won more than 200 awards for its private brand products in 2017. Given the growing popularity of the health and wellness lifestyle, Aldi ensures its private labels are free from synthetic colors, trans fats, MSG, and growth hormones. The grocer also expanded its line of gluten-free products and its SimplyNature products, which are free of more than 125 artificial ingredients.²⁸DeLoatch, Pamela. Aldi racks up more than 200 private label awards. Food Dive. January 3, 2018. 

Brandless:

This direct-to-consumer e-commerce disruptor sells private label goods and shortens the supply chain by bypassing retailers. To meet changing lifestyle, dietary, and belief systems, Brandless’ assortment includes a wide variety of organic, non-GMO, and clean products.²⁹Johnson, Lauren. 5 Brands Shaking Up the Grocery Industry by Changing What We Choose to Eat and How We Buy Food. Adweek. November 20, 2017.

Private label opportunities for retail companies

Given the growth of private label, suppliers of all sizes now have an opportunity to establish strategic partnerships with retailers, especially if they create products that align with in-demand consumer trends like organic, sustainable, and local goods. In addition, “innovative manufacturers who can keep costs low will be the winners” by helping retailers to scale fast using private label products.³⁰ L.E.K. Consulting. The Next Wave of Private Label. Supermarket News. February 22, 2017.

Retailers can stand out from retail rivals and national brands with innovative private brands. For instance, grocers can work with suppliers to create new private label solutions, including healthier food options than what’s currently available on shelves.

For both retailers and suppliers, growth areas include premium and specialty products, like salsa, granola, and prepared foods. Experts expect additional private label growth in fresh-to-go and perimeter categories, like produce, dairy, and meat.³¹ Ibid.

Since today’s consumers are hungry for variety, convenience, and ease, retail companies can use private labels to deliver exclusive products that honor consumer diversity and build loyalty with exclusive offerings.

Buyers, boost your private label offering by filtering brands with private label options on RangeMe. Discover private label brands here.

Suppliers, do you offer private label options? Be sure to update your profile with the correct information here.