Private label food and beverages, otherwise known as store brand or even no name products are becoming way more than a cheap alternative to brand name foods. Popular retailers in the US like Trader Joe’s, Kroger and Costco have built loyal customer followings around their in-house products, which is helping the private label food and beverages market in the US grow at a CAGR of 4.65% from 2014-2019.
Store brand foods are the smart way to go for large retailers
Manufacturing costs for private-label food and beverages are usually much lower than for branded products, which tend to ring in at 20%-20% more than their private label compatriots.
Part of the reason for this discrepancy in price isn’t quality, as some might expect, but a huge difference in manufacturing, distribution and advertising costs.
Where national brands tend to be aggressivelymarketed, store brands often don’t require the same level of advertising. Additionally, the logistics costs of big brands include warehousing, distribution, and material handling, while private-label products are free from most of these costs.
Brand loyalty essential for market growth
Brand loyalty is essential for any retailer looking to gain market share. It can be a hard thing to achieve for national brands, whose products are widely available across different channels and stores. Private-label products, on the other hand, are designed for exclusivity, making the probability of brand loyalty higher.
These products are also getting to the point where they’re comparable in terms of quality and selection, while putting more focus on customer satisfaction and value.
Market segmentation: Supermarkets are king of the store brand castle
The private label food and beverages market in the US is segmented into three relatively broad categories: Supermarkets, mass, club, and dollar stores, and drug chains.
The supermarkets segments is by far the largest in the market, with most of the top market vendors—including Safeway, Wegmans, Kroger and Trader Joe’s—being considered in that category.
Supermarkets have a leg up in the market, since they can develop and sell private-label products by creating a whole line of products with specific features. For example, to cater to the growing demand for organic, natural, and real foods, Safeway has introduced its own O Organics and Eating Right brands. Similarly, Albertsons has introduced Wild Harvest, a collection of real-food offerings and Kroger has launched its own Private Selection brand, which focuses on gourmet and artisanal foods.
