Private Label: Offering Retailers a Leg-Up

The enduring potential of private labels was highlighted at the NGA Show in Las Vegas, Tuesday.

“Ten years ago, maybe [private label] was a secret you had in the back of the store,” said Angie Balian, chief brand officer at UNFI. “Private brands aren’t what they were before. Now, think product quality, think packaging, think value.”

Balian led a session titled “Private Label—Maximizing the Power of Store Brands” which detailed how retailers can use private label products to strengthen brand identity, enhance product quality and value, and lead to more profitability.

She explained that, in 12 of the top 20 grocery categories, private-label brands outpace the success of national brands. She highlighted that these gains are not only in minor categories but also in staples, including cereal, household essentials, and frozen fruits and vegetables. This has led to upwards of 25 to 30 percent penetration per share of private brands for national retailers.

For independent grocers, Balian explained that, while their share of penetration is under 20 percent, there is rapid growth. She advised these retailers to double down on a strategy to grow their private label offerings because national retailers’ private label market share is expected to grow to 30 to 35 percent over the next three to five years.

She advised employing the following strategies to help nurture one’s private label program:

1. Maximize assortment: Offer the best private label assortment across the store.

2. Drive competitive pricing and item focus: Verify that the suggested retail price and key value items are fulfilling the needs of the community while bolstering profits.

3. Increase shelf and display space: Focus on providing more visibility for private labels on-shelves; don’t be afraid to put them adjacent to national brand equivalents.

4. Build value awareness: Invest in private label marketing to increase awareness and influence value perceptions.

5. Innovate: Use private labels to offer a unique point of differentiation.

“This phenomenon is here to stay. The question is how much you want to grow your penetration…to keep your shoppers from moving to mass or discount [retailers],” she said.

Brewing up Potential: Ready-to-Drink Coffee

During another session, Arthur Lopez, VP of marketing for coffee and tea supplier Finlay’s, discussed the untapped potential of RTD coffee within the category. Titled, “Black Gold: An Opportunity for Profit in Ready-to-Drink Coffee,” Lopez discussed how the latest coffee trends have primed the market for private label growth.

“For the first time, we are seeing pricing has reached its apex. The category has been growing for 25+ years and is finally showing signs of maturation. Logically, that means now is the best time for grocery chains that have private labels to get into the marketplace,” he said, adding that, although pricing growth has slowed, volume growth is expected to continue its upward trajectory.

Lopez also explained that ready-to-drink coffee has become a relatively healthy way for consumers to indulge and that shoppers are willing to pay nearly a dollar more per unit than many of its competitors, including energy drinks and conventional soda. He noted that the relatively cleaner labels of RTD coffee products also add to its value proposition.

Despite the willingness to pay a premium price compared to other beverages, consumers continue to seek food and beverage items that offer the best value.

“As shoppers become increasingly cost-conscious and aware of the premiumization of private label coffee, they will start to seek out these products to fill a gap as a cost-effective solution,” he said.

There are a few levers that makers of private-label coffee can utilize to provide a product that best suits its specific audience. Lopez advised considering:

• Pack format: should the beverage be single-serve, or big enough for a customer to make multiple drinks?

• Flavored versus unflavored and sweetened versus unsweetened: should the coffee come in an indulgent flavor, or does the customer prefer to customize the product at home?

• Milk or milk alternative: Lopez said that there is a lot of potential for the plant-based milk industry to make its way into the RTD coffee space.