Particularly with food products – where the market is staggeringly abundant with choices – private label with big brands provides a good opportunity for sales volume, ease of market entry, and building relationships with retailers.
Canadian Grocer‘s July 2018 article “The Rising Power of Private Label” indicates that private label store brands are rising in popularity, reporting five years of consistent growth and retail sales of $14.4 billion (or 18.6%) in 2017. Price, trust, and previous experience are the top reasons why Canadians buy private label.
Millennials represent a big growth opportunity for private label brands. A U.S. study by Cadent Consulting Group, found just over half of millennials (51%) said they have no preference between private label and national brands, compared to 39% of baby boomers who have no preference. It concluded that a store brand with two years of transparency, trust, and clean labels, can do extremely well over other brands.
Private label can have some major advantages/opportunities:
- The revenue stream generated through private label can be used to offset some of the costs of growing your own brand.
- From an operational standpoint, if your manufacturing facility is not running at full capacity it is a drain on your finances. Increased production volume can use up excess plant capacity and cover your overhead costs.
- Keeping the cost of goods in check is an ongoing challenge for manufacturers. Incremental volume from private label can provide leverage to negotiate lower ingredient and packaging costs.
- If supplying major grocery retailers like Loblaws, Sobeys, or Metro, private label can get your product on the shelf without having to pay listing fees. Since their portfolios are already well-developed, they need products to fill in the gaps, unique items that are on trend or lower cost alternatives.
- With respect to product formulations, retailers may accept a manufacturer’s formula or request the development of a proprietary formula to provide a point of difference versus their competitors. Having access to a retailer’s product development and quality assurance expertise is a learning opportunity that can be applied to improving other parts of your business.
- Major grocery retailers require their suppliers to be certified under a Global Food Safety Initiative (GFSI) like BRC, SQF or FSSC 22000 to name a few. This can significantly reduce business risks such as recalls and protect your brand as well.
Major retailers are getting very creative with health-conscious brands. A vendor for private label may contribute an ingredient which could be incorporated into the final product. Below are some examples of recent successful private labels by top Canadian retailers:
Sobeys recently launched three varieties of frozen, plant-based burgers under the Compliments brand: Carrot & Sweet Corn Burger, Beet Burger, and Green Bean & Pea Burger. The company also looks for “white space” categories it needs more presence in, such as baby food. One recent example is the new Compliments (Sobeys private label) Organic Baby Food pouches.
Metro is another retailer focused on private label products that fit with consumers’ healthy lifestyles. Last year, Metro launched Naturalia, a line of about 100 products under its premium Irresistibles store brand. Metro also has its Selections brand, a national-equivalent brand. Naturalia products, which focus on simple ingredients and nothing artificial, range from all-natural peanut butter to grain-fed chicken.
Longo’s private brand Signature are found in all departments, but are strong in the fresh department, bakery and deli categories. Longo’s recently won Product of the Year for its Signature Chocolate Truffle Mousse Cake. The grocer also recently launched its new Impress line of eight chef-inspired meal kits, which come with pre-portioned ingredients and preparation instructions.
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