Within the past year, sales of private-label brands have surpassed those of manufacturers' brands, according to a Nielsen report cited by Food Navigator.
The most recent "Total Consumer Report" from Nielsen stated that after trading negatively in the last quarter of 2016, store brands were "posting dollar growth of more than three times the rate of branded products" by the last quarter of 2017. Much of this growth was coming from premium private-label products, the report added.
To keep this momentum going, retailers will need to keep differentiating themselves by featuring products nobody else has, Matt Sargent, senior vice-president of retail for Magid, told Food Navigator. "Any retailer that doesn't have a premium private-label brand is in danger going forward," he said.
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.