- The appeal of private label brands today is less about a focus on price and more about the balance between value and quality, according to a study conducted by TreeHouse Foods.
- This is most apparent among millennial shoppers, who are more willing to experiment and switch between brands as they search for that balance, the study found.
- The report segments consumers into five groups based on purchasing habits: brand loyalists, detached habitualists, value optimizers, solution seekers, and quality purists. TreeHouse is using this segmentation strategy to help retailers develop better-targeted product lines.
As with any industry-funded study, conventional brand manufacturers should examine the findings and study methodology closely before drawing any conclusions. TreeHouse Foods is now the country's largest private-label manufacturer since it completed its acquistion of ConAgra's private-label brands business earlier this year.
TreeHouse analyzes these consumer segments in terms of what percentage are regularly buying private label products. The largest segments for private labels are the value optimizers (about 30% of private label spend), quality purists (about 30%), and solution seekers (almost 25%). These categories are where manufacturers have the biggest challenges, but also the largest opportunities, to attract consumers to branded products over private labels.
Manufacturers already have a firm hold on brand loyalists and detached habitualists, both of which tend to buy the same products every time they shop (branded or otherwise) and combined make up less than 20% of private label spend. These consumers tend to be the least engaged with marketing, packaging, and R&D strategies meant to lure consumers away from competing brands, so manufacturers can focus those strategies on the other less brand loyal consumer segments.
Delivering on this balance of quality and value is key for manufacturers to remain competitive. No longer do branded products exclusively serve the needs of health-conscious consumers as more private label brands have begun using natural and organic ingredients while keeping price points relatively low.
Retailers' private labels are beginning to cover a wider range of product categories. E-commerce sites like Amazon and Thrive are introducing their own private labels, which offer an additional convenience factor through home delivery that brand manufacturers still struggle to compete with.