Private-label products continue to gain market share. Private labels provide shoppers with an affordable alternative to national brands and give retailers a boost in profitability.
Cadent Consulting suggests that private-label dollar share could reach 25.7 percent by 2027, growing more than eight percentage points from where it is today.
“At this point in time, private brands have never been more critical to retailers’ strategies,” says Carol Spieckerman, a retail strategist and trainer. “Digital has driven the ubiquity of national brands, so price comparisons are a click away. Private brands are one of the only ways to differentiate, drive destination shopping and blur price comparisons.”
Walmart’s Great Value label is America’s largest food brand. Doug McMillon, President and CEO of Walmart, says “If we have engineered our specs so that you really love our granola, then there’s a loyalty that passes not just through the store but into the e-commerce business as well.” “Product-driven loyalty becomes even more important that it was in the past.”
Kroger generates more than $20 billion a year from its private-label brands. “Our private brand is shaping the way we redefine the grocery customer experience,” Robert Clark, Kroger’s senior VP of Merchandising said. In Kroger’s third quarter 2017 earnings report, their private brand portfolio delivered strong results, making up 28.2 percent of unit sales and 25.6 percent of sales dollars.
Strategy and Promotion
The rise of store brands has diminished manufacturers’ traditional advertising and pricing power. Embrace an agile operating model focused on brand relevance. Manufacturers need to convince shoppers that their brand is worth the money. To do this, manufacturers need a coherent branding strategy.
Excessive promotions train the consumer to wait for deals and shift the focus from the product to its price. National brands should pull back price-related promotions that can decrease consumers’ reference price points. When developing a promotions strategy, consumer product companies should more actively consider non-price-related promotions. While short-term promotions can increase sales, they can damage brand equity in the long run.
Private labels are here to stay. Manufacturers need to focus on product innovation and adopt a pricing approach that makes their product a must-have. Edwin Artzt, former Procter & Gamble CEO once said, “We’re not banking on things getting better with time. We’re banking on us getting better.”