How to Get Into the Private Label Business

Store brands can deliver big margins and brand strength to c-store retailers

By Renée M. Covino

PRIVATE LABEL PRODUCTS have come a long way since the no-frills days when they mostly stood for “cheap.” Today, they are a sign of retail value and commitment, and can often be the reason why a shopper frequents a particular store.

“Private brands are now a significant driver of trust and trip satisfaction in a retailer,” said Shelley Balanko, Ph.D., senior vice president of The Hartman Group, a consumer research firm that recently released a report entitled “Brand Ambition: Food and Beverage Private Brands & Beyond.”

Polling consumers about their perceptions of private label, the report revealed that:

• 91 percent of consumers agree that a good experience with store brand products makes them trust the store more; • 74 percent shop at a store specifically because of

its store brands; and • 63 percent trust store brand products more than national brand products because store brands stand behind their products.

The research also uncovered that consumers today shop less on brands and more on product attributes, and they are less dependent on national brands now that they have “so much information at their disposal,” Balanko noted.

Delivering consistency around “a constellation of attributes” and offering “truly innovative” items are two of the biggest opportunities she sees currently for retailers that want to set themselves apart and build margins through store brands.

Developing a private brand assortment that’s rooted in a commitment to quality drives customer traffic through the door and keeps it there. More than 71 percent of

7-Eleven collaborated with influencer Kerwin Frost to create the ultimate snacking uniform for the retailer's 7-Select products.

consumers shop at best-in-class retailers specifically for their private brands, cited Nicole Simonds, senior manager of integrated marketing strategy at Daymon Worldwide, a private brand solution provider.

“Convenience stores need to have a strong private brand program in order to differentiate their assortment and continue maximizing consumer loyalty,” Simonds told Convenience Store News. “As there is a 98-percent overlap of national brand offerings at retailers, private brands represent the perfect lever to help retailers stand out among the competition and keep consumers coming back for the unique offerings they can only get at their stores.”

Getting Started

Launching a private brand program starts with knowing who your shoppers are, understanding which categories are driving the highest sales, and identifying the categories that could best differentiate your store from competitors, Simonds said.

Acknowledging that it is easier for a chain, with larger buying clout, to accelerate a store brand offering vs. an independent convenience store, Alex Morrison, a business analyst with Cadent Consulting Group, suggests the following steps:

• Identify where private label can improve your product assortment, profitability and overall store image the most; • Start small in an area where you can be sure to add value; for instance, a more localized private label assortment of jerky would be perfect in a state like Texas; • Intensely vet your private label offerings to ensure they compete with the national brands and don’t just undercut on price; • Determine how private label branding fits into your long-term strategy and invest in marketing and promotion to build customer loyalty; and • Envision how private label can enhance the overall image of your stores and help them reposition post-COVID.

Technology can be a powerful tool to assist retailers in understanding their market.

“Today’s technology allows us to create insight into consumers’ buying patterns, from which we can map gaps and trends in dietary, sustainability, ethical and economic choices. This enables retailers to plan their assortment and identify potential private brand ranges to capitalize on specific trends,” said Paul Woodward, senior director of Oracle Retail Brand Solutions. The company’s Oracle Retail Brand Compliance cloud service is used by grocery retailers to manage more than one million private brand items a year involving 250,000-plus suppliers.

Promoting Store Brands

Just as convenience store operators use social media to promote their banner and national brand products, they should also utilize social media as a key lever to promote their store brands.

“Content should be developed that will not only educate shoppers on private brands and the assortment within categories, but it should also be created to incent trial and purchase, as well as create engagement across platforms with shoppers,” advised Nicole Simonds, senior manager of integrated marketing strategy at Daymon Worldwide, a private brand solution provider. “That engagement can come through content that drives conversation, as well as encourages commenting and sharing through social platforms with usergenerated content.”

In addition to social media, all forms of digital labeling, marketing and promotion are now crucial to reach all consumer touchpoints, according to Paul Woodward, senior director of Oracle Retail Brand Solutions.

“Consistency in the messaging and data are key to the success of these methods,” he said. “Consumer trust in the marketing material, product quality and claims are essential to ensuring the digital media landscape does not turn on the private brand.”

Mobile marketing is also seen as an important tool to reach today’s consumers about private label offerings, before they even enter the store. This can be executed through an app or with SMS/text marketing, retargeting ads, geotargeting ads, and more.

“These tactics should support the integrated marketing strategy and incorporate unique offers that should be tracked to measure performance and support private label sales growth,” Simonds advised. “Incorporating mobile marketing into a marketing mix can support special promotions, new brand or item launches, as well as a customer loyalty program that incents repeat purchases and drives sales of top customers.”

Alex Morrison, a business analyst with Cadent Consulting Group, believes the best example of a convenience store retailer utilizing mobile marketing and social media to promote a private label program is 7-Eleven Inc.

7-Eleven began its 7-Select private brand line in 2008. At the end of 2019, the nation’s largest convenience store chain launched its second private brand line — 24/7 Life by 7-Eleven — to mark a clear delineation between 7-Eleven’s nonfood private brand products and the packaged foods found under the 7-Select brand.

7-Eleven uses its mobile app to promote both its 7-Select and 24/7 Life store brands.

“Developing trust and word of mouth is perhaps the best way to spread the message for private label in a local environment,” Morrison said.

Four Reasons to Make the Jump Into Private Label

1. It can help reverse declining convenience store trips The pandemic saw c-stores taking hits in several categories where private label can make a difference, including tobacco, beer, nonalcoholic beverages, salty snacks, and candy. 2. It can be part of a larger rebrand post-COVID Differentiation is the name of the game, and private label can help a c-store business distinguish itself from its competition. 3. It can build on the changing nature of the c-store shopper Attracting more and different c-store shoppers was the result of necessity shopping during the pandemic. Building on that momentum can be a role for private label. Store brands also attract more millennial and Gen Z shoppers. 4. It can provide better brand positioning Consumers’ increased focus on health has been dramatic since the pandemic. Private label can help c-stores reposition toward health and wellness, particularly in the snacks category.

Source: Cadent Consulting Group

have originated from health or dietary initiatives that also support and promote the retailer’s values and brand promises,” Woodward added.

In the convenience channel, there are certain product categories that lend themselves well to store brands. Tobacco is one of them, according to Don Stuart, managing director of Cadent Consulting Group.

“Tobacco can be a winner if the private brand successfully undercuts branded products, especially given the high price and taxes,” Stuart explained.

He also sees non-alcoholic beverages from water to tea (but excluding carbonated soft drinks) as a strong fit for store brands, as well as salty snacks (in niche areas), candy, paper products, and over-the-counter medications.

While Simonds believes a robust private brand assortment entails having store brands represented across all areas of the store, she agrees that c-store retailers would be wise to start out by focusing on a core assortment within mainstay categories such as salty snacks, candy, fresh food, and water.

The Store Brand Customer

The consumer who buys private label products is shifting to younger generations, according to Cadent Consulting’s Morrison. He says this is largely because they have lessdeveloped brand loyalty than previous generations. In fact, a recent Cadent Consulting Group study revealed that 54 percent of millennials say their choice of retailer is influenced by the availability of a store brand.

“Millennials and Gen Z will become the majority of shoppers and they are predisposed to private label vs. older generations,” Morrison said.

Moving forward, Oracle’s Woodward believes sustainability and climate pledges will be a key focus for private brands. “From simply reducing plastics to fully assessing the eco-footprint of each product and assortment, we are seeing private brands meet and support global causes and consumer demands,” he observed, adding that he also sees transparency, traceability and compliance as vital to how a private brand is perceived by shoppers.

“Consumers are demanding greater transparency into supply chain ethics, sustainability and safety, which could be daunting for a new private brand,” he cautioned.

Private brands are now being established as “true brands,” Woodward summarized, leaving behind the economy persona of private label. “All indications suggest that private brands will strongly compete with CPG brands going forward,” he said.

The same outlook is shared by Simonds, who says private brands are well-positioned to continue supporting consumer behavior and driving preferences across the store.

“Consumers trust private brands and with the right innovation strategy, they have the power to lead categories and drive store choice,” she said. “With 92 percent of consumers expressing that private brands fit their lifestyle just as much or more than national brands, now is the time to innovate within categories and establish new favorite offerings.” CSN

7-Eleven is constantly innovating within its private brand product assortment to meet customers' changing needs.