What if... Retailers’ private labels became brands?16 Nov 2010
Private label continues to grow the world over. Private label already accounts for around a third of grocery sales by value in a handful of markets, while in the likes of Switzerland and the UK, penetration rates are fast approaching half of all grocery sales. In fact, Planet Retail would argue against the traditional belief that private labels have to justify their quality. Increasingly, it could be argued that it is now manufacturers’ brands that have to catch up with the quality of their private label counterparts. There are still a large number of consumers left who are willing to pay a higher price for the brand name. But for how long?
What is even more worrying for manufacturer brands is that there are indications that some private labels are making the transition to FMCG brands in their own rights by being sold in third-party retail stores.
Reasons to buy
The question is what impact this trend could have over the next few decades if retailers’ private labels do indeed become brands?
- Private labels increasing sophistication in terms of sub-brands and their growing acceptance in the eyes of consumers, means that private label will only increase in the future – at the expense of many FMCG brands.
- Some private labels are already making the transition to FMCG brands in their own right. This trend is likely to continue as it holds great benefits for the retailer that owns the label and those receiving it.
- Private labels will not replace FMCG brands altogether, but there is a big opportunity for premium, organic and niche labels in overseas markets – particularly in emerging markets.
- There will be increasing blurring between private labels and brands. Existing FMCG brands need to continue to invest in terms of quality, marketing and innovation. Also, brands may need to start thinking and acting like retailers and actually think about becoming more like private labels themselves?