Private label brands are not new. Since 1950, my grandfather, who was a merchant in the textile sector in South America with “Tiendas Pimentel”, defined as a business strategy to use his own brand on his products as part of a fashion style, elegance, quality assurance, and fair prices.
The history of private brands in mass consumption begins in 1970 with an added value proposition that has evolved over time, from lower quality to low prices to higher quality and higher prices.
In the United States, according to the IRI data, the own brands of consumer products (CPG’s) grow four times more than the national brands.
The Association of Private Label Manufacturers (PLMA) indicates that total sales increased by 5.8% in all retail channels with a total amount of $ 130.3 billion in 2018. IRI Consumer Connect surveys show that 8 of every 10 Americans buy from private brands frequently or occasionally to save money.
The following table illustrates the evolution of our own brands in recent decades.
Low quality, low prices
Low-cost packaging, no name. The so-called “yellow cap”
Same quality, same price Simple packaging, simple names
High quality, the same price Packaging design, supermarket brands
Innovative products, higher prices Luxury packaging and exclusive products
As noted, private brands are born to create more profits for supermarkets and to offer products at a lower cost to customers, as it is the case for Hispanic supermarkets and Aldi, which almost 90% of their products are private label brands to show product diversity.
Today, private label brands can become a major differentiator for supermarkets, as it allows them to offer exclusive products in the category of ethnic, gourmet, healthy, organic, gluten-free, as is the case with Trader Joe’s and Wholefood supermarkets.
The assortment and product portfolio of private brands can become a great motivator of purchases, especially among the Millennial generation (1981-1996), since they perceive the highest quality products by 76% and 73% with a higher value.
It is essential that brands have the trust and credibility of customers to be able to generate sales and expected profitability. In this sense, supermarkets must work on integrated brand management, from the product to the shopping experience, which includes some of the following aspects:
- Food laboratories that guarantee food quality and safety.
- Marketing department
- Specialists in market research
- Purchasing department
- A loyalty program
- Marketing to define the place within the store
It’s not an easy task, and that is why not all companies are successful in launching their own brands. Some brand distributors who, because they do not have direct contact with the consumer, don’t understand the market and are more “Product-focus” than “Customer-centric”. Errors are seen in excess inventory and low turnover of products.
That is why companies that want to apply their own brand strategies require new professional and product management capabilities focused on the customer. Depending on the size of the company, the investment can be very expensive, so evaluating the outsourcing of the service is an option.
Competitive Trade www.comerciocompetitivo.com can support you to define the type of own brands that best suits you according to your business objectives such as increased sales, generate traffic, expand product portfolio, impact profitability, seek differentiation with exclusive products or offer a positive shopping experience when discovering new products.