Only a decade ago, it was not easy to use the terms “private label” and “brand” together. But private label now means store brands, and retailers are starting to manage them that way. According to our friends at the Private Label Manufacturers Association, private label grocery sales were almost $60 billion last year (Kroger’s “Simple Truth” is about to become a $1 billion brand on its own) and are expected to keep growing fast.
But even if private label is here to stay, it means different things in different categories, and even as it grows it offers lessons – and opportunities – for brands, too.
At IMC we study all consumer markets for opportunities and growth strategies within individual categories, brand equities, and target demographics. By “threading the needle” through these layered filters we help brands identify ways to defend their home turf and grow at the same time.
Here are three ways that a careful analysis of private label data offers opportunities for brands and their partners.
Exploit Gender Differences
In general, women prefer private label products over men – but not in every category. In health and beauty products, men actually prefer private label brands more than women, 74% of whom prefer name brands in beauty products.
Beauty brands should take advantage of this strength (and defend their turf) by offering as broad a range of beauty products as possible, and by considering how to translate that brand strength outside beauty products.
Historically, consumer brands did not consider line extensions (via licensing or otherwise) until they were fully established, with maximum distribution and near-universal awareness. With competition from private label, brands may benefit from considering these strategies sooner to defend their turf.
In new- and fast-growing categories, retailers can swiftly insert store brands before other brands have established their own barriers to entry. Take healthy snack bars, for example. Brands like KIND and Clif have helped create this category but could easily lose share to aggressive store brands. Such brands should consider extensions sooner rather than later: KIND-branded vitamins or breakfast cereal could do more to defened this upstart’s market share than anything else.
Other brands and categories that should consider this strategy might include:
- Method – this strong brand has already grown by bridging gaps between floor cleaning and face soap. It could expand that strength by taking on categories like fragrancing and beauty products.
- Blue Buffalo – this brand helped create the healthy/premium dog and cat food category and could gain strength through other fast-growing pet categories like pet cleaning and bedding products.
Store Brands – but which store?
The strength of store brands depends on the strength of the consumer’s relationship with the store itself. Our own research suggests that relationship may be weakening as consumers buy groceries from an increasing variety of outlets. Twenty years ago, people bought most of their food from supermarkets, and often from only one supermarket chain or brand. Today those same consumers are buying food from supermarkets and from big box retailers, from club stores, from drugstores and from convenience stores.
Each of these channels has been aggressively growing its grocery business. And even though each of these channels also invests in its own store brands (from Target’s Archer Farms to Costco’s Kirkland Signature), consumer brands can become even more valuable for consumer who want to find familiar and trustworthy grocery products regardless of where they are shopping.
Brands can exploit this grocery fragmentation with line extensions – offering sizes and formats appropriate for each channel – and through brand extensions, too, giving consumers whatever range of products they want in each channel.
The growth of private label has hurt many brands, but it doesn't have to. Smart brands that are willing to license and work with partners can strategize around private label to find unique ways to grow in an increasingly private-label world.