Private Label Retail in F&B – A New Paradigm in Consumer Choice

Private label retail, also known as store brand or own brand, posted remarkable growth in recent years globally. Retail giants, such as Walmart and Target, played a significant role in driving this surge, revolutionizing the way consumers perceive and engage with private label products, especially in the Food and Beverage(F&B) segment. While it can help increase the profit margin of retail stores, it comes with a set of challenges.

Private label retail refers to exclusively manufactured products sold by a particular retailer under its own brand name. These products are developed to offer alternatives to national or international brands, providing consumers with a range of options across various product categories. Private label products can be found across a broad spectrum, including food and beverage, household goods, and personal care items.

The F&B segment

The global market for private label food and beverage is poised for substantial growth in the foreseeable future, primarily driven by the proliferation of competitive private label players within the healthy snacks and ready-to-eat meals industry segments. According to data compiled by the Private Label Manufacturers Association (PLMA) and market research firm IRI, Inc. based in Chicago, the sales of private label products across retail outlets in the US recorded a noteworthy surge, surpassing 11% and reaching a total of $229 billion in 2022. Concurrently, dollar sales for national brand products registered a 6.1% increase, amounting to $981 billion. Collectively, these figures propelled the overall sales within the grocery industry to an impressive $1.2 trillion.

Walmart and Target, two of the largest retailers in the US, have significantly contributed to the expansion of private label retail for F&B segment. Both companies heavily invested in developing and promoting their own brand offerings, leveraging their extensive retail networks and consumer trust.

Walmart has successfully established a diverse portfolio of private label brands, including Great Value, Equate, and Mainstays. These brands span multiple categories and have gained popularity due to their competitive pricing, quality assurance, and extensive availability in Walmart's vast store network. Another major player, Target, developed popular private label brands, such as Archer Farms, Up & Up, and Market Pantry, known for their unique product offerings and trendy designs.

Global Perspective

The rise of private label retail is not limited to the US; it has gained traction globally. For instance, Europe has long embraced private label retail in the F&B segment. Retail giants like Aldi and Lidl made significant inroads with their private label offerings, often surpassing national brand sales. Aldi's private label brands, such as Choceur chocolates and Millville cereals, gained popularity across European markets.

The Asia-Pacific region is also witnessing major retailers in Australia, Japan, and China expanding their private label portfolios. For example, Woolworths, one of Australia's leading supermarket chains, introduced private label products, including Macro Wholefoods and Woolworths Select, catering to health-conscious consumers.

The Middle East and Africa region also have a growing presence of private label retail in the F&B segment. Retailers like Carrefour and Spar have successfully launched private label brands across multiple countries. Carrefour's Carrefour Quality Line and Spar's Spar Brand offer a wide array of F&B products, including pantry staples, dairy, and frozen goods.

Benefits

Private label retail offers numerous benefits for both retailers and consumers.

For retailers, it provides an opportunity to differentiate themselves from competitors, build customer loyalty, and improve profit margins. By having control over the entire supply chain, retailers can develop unique product offerings, maintain quality control, and respond quickly to changing market trends.

Consumers, however, benefit from private label retail through increased choice, affordability, and quality assurance. Private label products often offer comparable quality to national brands at a lower price point, making them an attractive option for price-conscious consumers. Additionally, private label brands frequently introduce innovative and niche products, catering to specific consumer preferences and dietary needs.

Challenges

While private label retail posted remarkable success, it also faces certain challenges.

1. Brand Recognition and Trust: One of the major challenges faced by private label retail is establishing brand recognition and gaining consumer trust. National brands often have well-established reputations and loyal customer bases, making it difficult for private label brands to compete in terms of perceived quality and reliability.
2. Differentiation and Innovation: Private label retailers face the challenge of differentiating their products from national brands and offering unique value propositions to consumers. Developing innovative and distinctive offerings that stand out in the market is crucial to attract customers and create a loyal customer base.
3. Supply Chain Management: Managing the supply chain can be a complex task for private label retailers. They need to guarantee reliable supply of high-quality products, maintain relationships with manufacturers, and effectively manage inventory levels. Overcoming logistical challenges and maintaining supply chain efficiency is essential for meeting customer demand and minimizing disruptions.
4. Marketing and Promotion: Private label retail often requires significant investments to increase brand awareness and drive sales. Creating effective marketing campaigns and effectively communicating the value and benefits of private label products to consumers is crucial, especially in a market dominated by established national brands with larger marketing budgets.
5. Perceptions of Quality and Value: Overcoming the perception that private label products are of lower quality or inferior to national brands can be a significant challenge. Private label retailers need to consistently deliver products that meet or exceed customer expectations in terms of quality, value, and taste. This requires ongoing quality control measures, product testing, and a focus on maintaining high standards throughout the production process.

Private label retail in the F&B segment is poised for remarkable growth and expansion in the foreseeable future. As evidenced by the increasing market share and consumer acceptance, private label brands have successfully entered the F&B industry, offering consumers a broader range of choices and competitive alternatives to established national brands.

Going forward, it is evident that the private label retail market in the F&B segment will flourish. As consumers increasingly prioritize value for money, personalized experiences, and a wider range of choices, private label brands are well-positioned to meet these demands. With ongoing innovation, effective marketing strategies, and a focus on maintaining product quality and consumer trust, private label retail is poised to grow and thrive, offering consumers a compelling alternative within the F&B industry.