Daymon, a Connecticut-based global consumer retail and private brand agency, has just published its first Private Brand Intelligence Report. The group asserted that, for retailers, "[I]f you don't have a solid private brand strategy, you're dead in the water," reports Store Brands.
The Private Brand Intelligence Report 2018 analyzes how well private brands compete with national brands based on proprietary survey data, category research from Daymon analysts, and expert insights. Among the survey findings: 81% of shoppers buy private brands on every, or almost every, shopping trip; 85% say they trust private brands as much as national ones; and private brand sales are up 4% more than national brand sales.
A majority of retailers (65%) competing with discounters featuring private brands — such as Lidl and Aldi — lost 10% more money to them during the past year, Daymon reported, and these value discounters are continuing to create turmoil for traditional retailers.
Daymon CEO Jim Holbrook said in a release that this is "a renaissance period" for private brands. He also said the most successful retailers have "distinctive, one-of-a-kind private brands."
Daymon's research and shopper survey appear to bolster the group's conclusion that private brands are in prime position to disrupt the industry. The report emphasizes that a majority of consumers (60%) want to see more private brands getting involved in fresh products, so that is expected to be a major growth area in the near future.
According to the Private Label Manufacturer's Association, private brands make up 17% of total grocery sales. And Nielsen estimates that, in 2016, nearly one in every five items sold in U.S. supermarkets was a store brand. Private brands claimed 18.4% dollar share and 22.3% unit share that year, and total market size was pegged at $150 billion.
Chains such as Aldi have shown that private label doesn't need to mean something consumers settle for. In the same way Target managed to create a trendy buzz around its in-house clothing brands, consumers are continuing to look past the national brands for fresh, new food products, particularly those they know and trust.
Meanwhile, there are challengers more than happy to shake up the private label market. Brandless, a San Francisco e-commerce startup, started selling 115 environmentally and health-conscious product staples last summer. Consumers pay a $36 annual membership fee to get free shipping on all orders, with products shipped out from distribution centers in California and Indiana.
Despite these challenges, though, retailers are increasingly banking on private label brands due to their popularity and consumers' now-engrained shopping patterns. Whether not adopting private labels — or not stepping up their current game and debuting more private label products — means a company will end up "dead in the water" could be overstating the case. However, it's likely that few food marketers in today's highly competitive marketplace would relish taking that gamble.