Today’s post is by Gayl Southard, Administrative Consultant, SafeSourcing.
Years ago private label products were easy to spot on the grocery shelves. They were bland in color and referred to as “generic”. Consumers considered private label products to be inferior to the colorfully packaged national brands. Today there is a lot more emphasis on private label advertising and packaging. Last year, store brand sales reached an all-time high of $118.4 billion, cornering 17.7% of the total market, according to the Private Label Manufacturers Association.
Advantages of national branded products:
- Name recognition, visibility and trust.
- Larger advertising budgets (tv advertising, print and digital advertising)
- With years of experience, branded products have worked out kinks in their supply chain (Ingredient sourcing, and manufacturing techniques).
- Better control over inventory orders.
Advantages of private label products:
- There isn’t a need to spend money on advertising, thus keeps costs down.
- A key source of revenue for a grocery store is to put their own private label product on the shelf next to a major brand. On average private label brands produce 8-10% higher margins.
- Retailers can order products that they want and demand exactly what specifications they want.
Disadvantages of Private Label Products:
- There is more risk if a product doesn’t succeed. Retailers have to invest in packaging, design, and ingredients in hopes that the product does well. Less brand recognition.
- Retailers need a good private label manufacturer (some retailers will be dealing with many manufacturers) that provide good service and have good demand planning that is efficient.
- “If retailers want to drive more multicultural consumption of their store brand, they’ll need to improve their educational efforts around the offerings provided by their private labels, and tailor those offerings to the unique demands of multicultural families.”1
“The bottom line is it’s all driven by economics. It’s customers looking for better prices and still good quality. It’s retailers looking for better margins. It’s branded product manufacturers looking to fill up capacity, as well as the contract manufacturers.”2
1, 2 Carolyn Heneghan, FoodDIVE,, 11/7/16
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