April 12, 2018
Nielsen reported that private label has seen “a complete reversal in growth trajectory compared to manufacturer branded items.” Projections point to continued growth for the category — dollar share could hit 25.7% by 2027, translating to a more than 8-percentage-point growth rate over the next decade.
Trader Joe’s, Aldi and Lidl, among many other retailers, have emphasized store brands both online and offline with great success. Private labels are helping them bring in more revenue — as well as build customer loyalty and differentiate themselves from competitors.
Food manufacturers are likely watching this trend with some alarm, even though some of their brands outsell private-label products. The trick will be convincing shoppers that the tried-and-true national brand is worth the extra money it may cost. Longtime legacy brands may get an extra boost in challenging times if they’ve continued to innovate and haven’t rested on their laurels.
If national CPG brands don’t keep up with the premium private-label push, the U.S. grocery scene could end up looking more like Europe, where private label commands more loyalty than it does here. In the U.K., private labels have a 45% market share in the grocery sector. The key will be more innovation, more value for the money and more marketing to consumers who have lots of choices about where and how they shop.
What happens with the economy and individual buying power will influence this whole picture, and could convince shoppers to go back to value brands in order to shave a little off their food budget. But if private labels keep up with the changes, offer plenty of value for the money and adequately respond to consumer demand, they could ride the current trend for quite some time.