- Private labels are taking cues from branded product manufacturers by embracing different value tiers in product varieties within the same category, top officials from TreeHouse Foods told Food Business News.
- TreeHouse Foods, the largest U.S. private-label manufacturer since acquiring ConAgra’s private-label business last year, has led the segmentation trend in its industry, including standard and premium varieties.
- TreeHouse said it had to adapt as consumers’ definition of value shifted away from just being based on price to a combination of other factors.
This approach might especially appeal to millennial consumers, who tend to be less brand loyal than previous generations and who often also distrust major food and beverage manufacturers. If private-label brands can deliver comparable quality of ingredients and processing, even if the price point isn’t significantly lower, these consumers may not hesitate to forgo brand names.
Now that private labels are further segmenting their product varieties, these products could become even less distinguishable from their branded counterparts. Consumers may have once associated private label with cheaper products and lower quality. But as more retailers and private label brand manufacturers challenge the status quo, they can charge higher prices for premium products and stay at a competitive price point to name brands.
However, the industry still has to convince retailers to commit to a two- or three-tier value system for their store brands. That means creating new brands and products, which could overextend the experience and expertise retailers have in R&D and product innovation. But if retail partners are willing, they could be more competitive with branded products on their own shelves.