THE TIME IS NOW FOR PRIVATE LABEL GROWTH IN THE RETAIL MARKET

The Growth of Private Label

Consumers are grappling with uncertainty as the cost-of-living increases at a startling rate and the impact of fragile ‘just in time’ supply chains impacting choice. However, there is a strong sense that the PL category might capture the favorable trade winds and rapidly accelerate its share of the grocery market.

Observers of the sector have witnessed the growth and private label penetration of well-recognized grocers: Canadian Loblaws, USA Trader Joes, UK Tesco or Sainsburys as examples, each with well-established PL alongside the increase in market share of the major discounters, Aldi, or Lidl.

Strong Private Label Strategy

Let’s recap why a strong PL strategy is important: Loblaws, Canada (one of the best food grocers) has led the charge with PL. In the early days of the journey, Dave Nichols (Head of PL) developed the Ultimate Chocolate Chip Cookie – a box of the best-tasting cookies that became a beacon for PL winning on value (quality x price). Delivering on two key objectives, firstly inspiring team members to become ambassadors for their company-owned PL products and – equally importantly – a great product only available within Loblaw’s stores, driving customer loyalty. Today many of the most successful grocers with strong PL have their own Ultimate Chocolate Chip Cookie replicating this strategy.

A successful PL strategy gives customers a reason to shop with a particular grocer, recognizing they can only buy these products within this chain, leading to what is commonly referred to as a ‘destination’ to shop. Attracting consumers to a particular grocery chain based on the value or strength of the PL range means that while within the store, they shop the leading brands, the grocer wins a larger basket spend.

A plethora of factors are impacting consumer trends today; analysts are increasingly applying the term ‘consumer fatigue’ as the economic environment continues to impact spending habits. History shows that in times of hardship, consumers switch to frugality, which should be good for PL across multiple tiers.

Key Learnings from Leading Markets that can be applied to growing markets.

• Increase strategic supplier relationships to maintain supply and encourage longer-term investment. Partnerships drive growth through collaboration.

• Incorporate the Environmental, Social, and Governance (ESG) agenda to the private label strategy, targeting reduction in food waste, sustainable packaging, and social compliance across complex supply chains.

• Understanding where consumers have sufficient trust to switch to a PL option is crucial for success. Growing penetration will depend on strong category strategies and recognizing where high brand loyalty will prevent consumers from

• Increased discount for loyalty program members, visual at the point of purchase, further highlighting saving opportunities.

Interesting Innovations driving consumer engagement. Additionally, as grocers look to improve engagement with consumers, we are seeing some interesting innovations that include:

• Digital solutions taking Key Value Items (KVI – the lines that retailers are regularly price compared on) and personalizing to consumers.

• Compare and save strategies at point of shelf on key lines highlighting the savings by switching from the leading brand to a PL offer.

• Shielding during promotional activity whereby the PL product remains the best value offer maintaining profit levels per product sold.

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Sophie Van De Water Graduate Intern Cibus Nexum

PL MANUFACTURING - WHAT’S IN A NAME?

Private label products have become an increasingly popular choice for consumers seeking nutritious and affordable food options, particularly as the economy faces rising inflation. However, as the private label industry continues to grow and evolve, there is a debate over whether new terms, such as “Comanufacturing” or “3PIM” (3rd party innovation & manufacturing), are more suitable than the traditional term “private label.”

One potential advantage of the new terms is that they better reflect the collaborative and innovative nature of the private label industry. The term “Co-manufacturing” highlights the partnership between retailers and manufacturers, while “3PIM” emphasizes the role of innovation and manufacturing.

These new terms may be more inclusive and descriptive for industry professionals and could better capture the full scope of the industry.

Another potential advantage of using new terms is that they could potentially help to rebrand private label products and eliminate the negative connotations often associated with the term “private label.” By using a new term such as “Co-manufacturing” or “3PIM,” retailers may be able to create a more positive image for their store-brand products and elevate them to a level of respectability equal to that of national brands.

However, there are also potential drawbacks to using these new terms. Firstly, they may not be as widely recognized or understood as the term “private label,” which has been used for decades and is well established in the industry. This could lead to confusion and require additional explanation for those not familiar with the new terminology.

Secondly, the new terms may not accurately reflect the full scope of the industry and the organizations that represent it. While "Comanufacturing" emphasizes the partnership between retailers and manufacturers, it does not fully capture the role of other players in the industry, such as brokers, agents, and consultants. Similarly, "3PIM" focuses on innovation and manufacturing, but does not account for other aspects of the private label industry, such as branding, marketing, and distribution.

In conclusion, the debate over the suitability of new terms for the private label industry is complex, and there are both advantages and disadvantages to consider. While new terms such as “Co-manufacturing” or “3PIM” may better reflect the collaborative and innovative nature of the industry, they may not be as widely recognized or inclusive as the traditional term “private label.”

Ultimately, the decision to adopt new terminology should be made with careful consideration of the impact on all stakeholders, including industry professionals, organizations, and consumers. Regardless of the terminology used to describe the industry, private label products will continue to play a vital role in meeting the needs of consumers seeking affordable nutrition. This for sure will be the number one topic number at the PLMA Amsterdam 2023.

Pascal Ruzius

Founder of Cibus Nexum and an agricultural engineer with 25 years of experience at FMCG companies and global outsourcing projects.

Sophie van de Water

As an international food business student at Aeres College, Sophie studied in Canada at Dalhousie University and interned in Vancouver. She is currently working on her graduation internship at Cibus Nexum and writing her thesis on the protein shift within traditional dairy companies.

HAMILTON CEO THE FISH AGENCY