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Private Label

Private Label Brands: The Future Leaders Of Retail?

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Private Label Brand Strategy Great Value

Consumers are definitely giving retailers permission to grow their private label brands. The real question is will retailers grow private label brand value or simply grow more private labels? In the age of mega-private label brands, this trend is giving national consumer product goods brand managers some added anxiety these days. It also presents some relationship challenges for retailers to grow the value trusted CPG brands bring to their customers.

According to a report published by consulting firm Deloitte, consumer’s perceptions and attitudes toward private label brands are changing significantly; and offers insight into the notion that spending less for private label brands doesn’t mean consumers are settling for less from private label brands. According to the report only one-third of the respondents endorsed the statement “ I often feel that I am sacrificing when I purchase a store brand instead of a national brand”. This is no surprise when one stops to think that many consumers today believe that store brands and national brands are essentially made of the same ingredients. According to the report, 80 percent believe the statement “most store brands are manufactured by the national brands”.

The report further suggests that the current economic climate has made consumers more discerning about the brands they prefer. 75 percent of respondents agreed “ these economic times have made me more aware of which brands I care about and which ones are less important to me”.

Who’s winning? 
Seemingly one could easily conclude that private label brands are beginning to win the battle of the brands through market share gains over the national brands. What’s accelerating this trend is private store brands are beginning to employ more strategic product innovation and the brand management discipline commonly employed by big national CPG brands. Consumers now believe there is little difference in quality or value between the two alternatives. Worse, many consumers believe they’re paying for the “advertising” of the higher priced national brands. Here are some more interesting highlights from the report:

Between 2006 and 2009, private brand market share rose across 74 percent of products in the personal care, household goods and food and beverage categories in the United States.

Private labels represent 20 percent of grocery store and 18 percent of supercenter sales.

Store brand products were 31 percent cheaper across product categories than their national brand counterparts.

Store brands are not just a recession related phenomenon – U.S. store brand sales continue to grow over the long run despite improving economic conditions. The latest data supports this. According to this month’s food and beverage market research report by The NPD Group, private label’s share of household servings was 18 percent in 2000 and reached 27 percent in 2011.

Retailers are now taking product and brand building innovation to heart. What’s driving innovation within private label brand-driven retailers is fairly simple–they can be far more nimble than national CPG brands. Developing a private label brand can be far more efficient and at a much faster pace.  Private brands don’t have to make the long-term capital investments in product development, manufacturing and rigorous BASES testing and other quantitative research methods to gain the assurance that their value proposition is relevant and the long-term investment warranted. Private label brands have the real-time retail environment to test brand concepts with far less risk, and they receive immediate feedback because their customer’s are voting with their dollars right in the store!

Walmart’s Great Value brand is a case in point on being nimble and innovative in near real-time. Covering well over 100 product categories, and launched in 2009, the Great Value brand continues to adapt and transform itself much faster than CPG brands of similar scale. The Great Value private label brand was so expansive and compelling at shelf, customers began to believe they were being driven to favor the value brand over national brand alternatives. At the risk of alienating customers and CPG suppliers, Walmart correctly and quickly balanced their “brand block” private label brand presentation in a fashion that did not obscure the shelf presence of national brands–thus the power of a mega-private label brand.

Private label brands will lead the way.
 It’s probably safe to conclude the next generation of super successful brands will not come from the name brands, but from more private label brand-focused retailers. Consumers seeking to save some money in tough times may be fueling the current growth in private label brands, however the cat is out of the bag, and progressive retailers will continue to innovate and leverage to the fullest advantage their immediate access to their customers.

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