- Retailers are looking to overcome the "generic" label by making changes to their private label brands to become stronger competition for conventional food and beverage manufacturers.
- Instead of focusing solely on low-cost products, retailers are sourcing on-trend ingredients and developing more attractive packaging to appeal to consumers.
- Kroger, Albertsons, Publix, and Costco are a few retailers with private label brands that manufacturers will have to watch out for, in addition to Whole Foods and its "365 by Whole Foods Market" chain concept that focuses on value, against Whole Foods' perceived nature, to lure in millennials.
Private label brands are still the minority, with annual sales of $120 billion out of the $725 billion for packaged goods overall, according to a January 2015 report from IRI. But their appeal is growing as retailers focus on improving these products, and consumers are noticing the difference. In a 2014 global survey, Nielsen found that 71% of respondents had seen improvements in private label brands.
In the U.S., private label sales make up about 18% of packaged food sales, according to Nielsen data, but in some countries, that number is as high as 45% (Switzerland).
Product selection is where manufacturers still have the upper hand. Retailers don't tend to have the capital, flexibility, or R&D capabilities to create the niche products and flavor varieties that manufacturers can. Nielsen found that 59% of consumers globally would purchase more private label brands if they offered a wider variety of products. To remain competitive, manufacturers that continue focusing on product innovation and driving new trends will maintain market share.