Is Private Label Food the New Business Model Power Paradigm?

 

The retail industry is witnessing a paradigm shift, with private label products becoming a formidable force. Recent data underscores this trend, revealing a substantial surge in store brand market share. According to Circana sales data, store brands achieved unprecedented highs in both unit and dollar share during the first six months of 2024, compared to the same period last year. As of June 16, unit market share stood at 22.9%, and dollar market share at 20.4%. Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® believes that at its core private label is clearly ascending fresh prepared food to levels not even dreamed about five years ago.  

The Surge of Store Brands

PLMA President Peggy Davies aptly described this as the "store brands phenomenon," which is transforming the retail landscape across all channels, departments, and categories. The superior performance of store brands at checkout, compared to national brands, is a significant contributor to this trend. Store brand dollar sales increased by 2.3%, outpacing the 1.1% gain of national brands. The disparity in unit sales growth was even more pronounced, with store brands rising by 2.5% while national brands declined by 0.8%.

The New Power Paradigm: Facts and Figures

The success of private label products is not just a fleeting trend but a robust business model power paradigm. The total store brand sales for the first half of 2024 reached an impressive $121 billion, compared to $472 billion for national brands. The outlook for the rest of the year is optimistic, with PLMA projecting that total store brand revenue for 2024 will exceed $250 billion, setting a new record for annual sales.

Keith Lincoln and Lars Thomassen, in their seminal work, have long advocated for the potential of private labels. They emphasize that private labels offer retailers higher margins, stronger brand loyalty, and greater control over the supply chain. These advantages have become increasingly evident as more consumers turn to store brands for their perceived value and quality.

Category Performance: A Broad Spectrum of Success

Circana's data reveals that store brand sales are flourishing across nearly all product departments. Here’s a snapshot of the categories that have seen significant gains over the 52 weeks ending June 16:

·         Beauty: +10%

·         Liquor: +8.8%

·         General Food: +6.9%

·         Home Care: +6.8%

·         Pet Care: +5.8%

·         Beverages: +4.3%

·         Frozen: +2.9%

·         General Merchandise: +2.2%

·         Home: +1.7%

The only exception was the refrigerated category, which experienced a slight decline of -0.7%.

The Strategic Advantage of Private Labels

Private labels have become a strategic asset for retailers. By offering products that compete directly with national brands in quality and price, retailers can attract a loyal customer base and differentiate themselves in a crowded market. This is particularly crucial as consumer behavior shifts towards seeking value without compromising quality.

The rise of private labels is also driven by innovation and responsiveness to consumer trends. Retailers are investing in product development, packaging, and marketing to elevate their store brands. This investment is paying off as store brands now represent a viable alternative to national brands, appealing to a broad demographic spectrum.

Looking Ahead

The trajectory of private labels suggests they are not just a trend but a fundamental shift in the retail business model. As Lars Thomassen and Keith Lincoln highlight, the potential for growth in private labels is immense, driven by the benefits they offer to both retailers and consumers.

With the continued focus on quality, value, and innovation, private labels are poised to reshape the retail landscape. As we look forward to the rest of 2024 and beyond, it is clear that private labels are setting the pace, and their dominance is likely to grow.

The Grocerant Guru® perspective is clear: the rise of private labels marks a new power paradigm in the retail industry. Retailers who embrace and invest in their store brands are not just keeping up with the trend; they are setting the stage for future success. The data is compelling, the benefits are clear, and the future of private labels looks brighter than ever.

Don’t over reach. Are you ready for some fresh ideations? Do your food marketing ideations look more like yesterday than tomorrow? Interested in learning how Foodservice Solutions® can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us or visit us on our social media sites by clicking the following links: Facebook,  LinkedIn, or Twitter