Not Your Father’s Private Label

Much of this growth is due to expansion beyond traditional categories and the growth of physical stores that focus largely on private label, such as Trader Joe’s, Aldi and Lidl.

Supply ‘Drivers’ Behind the Change

Three supply side issues are driving the shift in private label positioning:

Need to differentiate: The key advantage of convenience that grocers once enjoyed has been eliminated by intense competition from mass retailers and ecommerce players. Traditional retailers are struggling to create a reason for people to maintain their physical shopping habits. Unique store brands present a reason to go into a store.

Cost control: Private label brands allow retailers to remove or significantly reduce marketing costs.

An explosion of options: Direct-to-consumer (DTC) players are offering consumers new ways to engage with unfamiliar brands and products every day. One example of the DTC dynamic is ecommerce power player Brandless, which touts its ability to eliminate the “brand tax” that retailers pass onto consumers. DTC options like Brandless are forcing traditional retailers to create their own brands to keep option-loving customers engaged.

Demographic Changes

Three demographic trends are combining with the supply-driven trends mentioned above to increase consumer interest in private label brands. These three trends, while seemingly contradictory on the surface, are essential to understanding the new wave of private label:

Brand love and the Millennial myth: One huge myth in marketing today is that Millennials don’t care about brands. This is a massive misconception. Millennials love brands, as evidenced by Magid’s “2017 Retail Pulse” study. In fact, Millennials have greater preference for established national brands than Gen Xers and Boomers.