With the PLMA’s 2011 Private Label Trade Show fast approaching, I got to thinking about what the term Private Label really means and how it is taking over the Consumer Products industry.
Private label refers to products or services that are manufactured by a company to be sold under another company’s brand name. This term stretches across multiple industries, from food to vitamins to home care products. For the most part the consumer is unaware who is manufacturing the products they buy and in turn unaware that they are buying a private label product.
The most frequent way in which a consumer will have contact with private label products is at the store brand level. For many years retailers have used private label to identify a brand with a store. Take Walgreens for example. The Walgreens brand of products are now sitting right next to the big name national brands. Consumers have come to associate the store brand product as a “knock off” or lower cost item.
What was once known as the “cheap” product; now exceeds 50% market share in some product categories. While that number might be a reflection of our economic status the past few years, it is also a reflection of how private label companies have stepped up their game to compete with the leading nationally advertised brands. Private Label used to be associated with drab simple product packaging, but it has since evolved to having better graphics and brighter colors. Now, when you look on a store shelf the only thing separating the national brand from the store brand is the name and price.
There is still a stigma that exists that the store brand is a cheaper or weaker product. I guess that means that the national brands’ advertising dollars have been well spent. However, if you take the time to sift through the ads and actually look at the product ingredients you will find that a lot of times they are exactly the same as the national brand.
Consumers have gotten a lot smarter about what they purchase. They are taking the time to compare products and research what they are buying. Store brands have also gotten smarter. They are realizing they need to step up and compete with national brands. Their product packaging also needs to stand out on store shelves. With this combination I think the private label industry can close the gap from the 25% market share that they now have to the 58% market share that consumers state they would consider spending.