ORLANDO, Fla. — To be successful in the private label arena today, manufacturers need to live up to a new value proposition, noted Diana Sheehan, director of retail insights at Kantar Retail, during the Store Brand Food & Beverage EPPS hosted by ECRM last week. It's a value proposition where price is no longer the only factor that matters, nor is it even the most predominant force influencing consumer purchase decisions.
"From a brand perspective, private label really creates an opportunity for your retail partners to stand apart," Sheehan said. "[For example], retailers like Kroger [have] really evolved into a place where they have traditional private label, all the way up to [own] brands that are truly transcendent and stand on their own," she said.
With growth among private-label savvy retailers like Trader Joe's and Aldi, and with Lidl about to enter the U.S. in a big way, this evolution of private label from the traditional NBE proposition will continue to morph into an own brand product offering that's able to compete against national brands on their own merits.
And that's going to spark a greater focus on own brand offerings across the retail landscape.
"We are going to see more and more of the regional players look to become sophisticated in that way," Sheehan said. "As they do that, they're going to need help in identifying the right categories and, within the right categories, the right offer to separate and differentiate themselves in the marketplace."
European manufacturers may have valuable insights around promoting own brand quality and driving efficiencies through the supply chain so that the profit math still computes. In Europe, own brands enjoy a much higher dollar share of the market, as high as 41% in some countries, compared with the U.S. market where it is 18%.
"The [U.S. marketplace] is ready for private label to really explode," Sheehan said. "There's a gap between supply and demand," she said, suggesting those manufacturers who invest in greater supply capacity may be well rewarded for their efforts.
"What's interesting though, particularly with higher-tier brands, price becomes [less relevant]," she said. "Outside of that opening price point brand in private label, I don't know that price has to be the underlying factor anymore. Particularly if you are looking at [own] brands where they can actually increase their margin and truly compete on their own versus branded, the pricing equation that we've grown up with is evolving as well."