Private labeling is the act of taking an existing product and placing your unique brand on it. As a retail strategy, private labeling is not new. For decades, big grocery stores have taken generic items, labeled them as their own, and set them on the shelf right next to name brand products.
Looking back: How private labeling has grown
The perception of private label brands used to be quite negative. In North America, for example, there was a widespread consensus among shoppers that private label brands were for folks on tight budgets that couldn’t afford the best. Consumers were fiercely brand-loyal, and in most product categories, popular name brands were always purchased first.
The various economic recessions in the early 2000s completely shifted the retail landscape. Driven by lower prices, shoppers began looking for the biggest bang for their buck. And for the first time in retail history, this trend was consistent across almost every single product category.
The economy has stabilized in recent years, but consumers were already accustomed to saving money by turning away from big name brands. The preference to buy lower-priced products has not shown any signs of slowing. Plus, private labelers have done a remarkable job of increasing the quality of their products in the last 10 years. Research shows that consumers truly feel that in terms of quality and value, these products are equally as good as the name brands they used to purchase.
Private labeling food products
Food products have been private labeled since the beginning of time. Take two of Abraham Lincoln’s closest friends in the 1850s, for example.
The Bunn brothers were the proprietors of a chain of local grocery stores, J. & J.W. Bunn Grocery Co. They specialized in retail and wholesale trade, selling bulk items out of barrels, sacks, casks, kegs and so on. Lincoln and the Bunn brothers developed a close friendship over the years, and it wasn’t long before Lincoln and Mary Todd Coffee products could be found on the Bunn grocery shelves. The brothers also carried a myriad of other private label products, such as Wishbone, Golden Age, Old Timer and Bunny (named after themselves).
Some well-known private label food brands of the modern era include Safeway Select items at Safeway, 365 Everyday Value products at Whole Foods and Kirkland goods at Costco.
Advantages of private labeling for retailers
The last 10 years have brought a huge increase in the number of retailers interested in developing private label brands. Some of the more distinct advantages these business owners are now enjoying include:
- Personalized product selection for customers, which typically leads to more sales.
- Better pricing and quality control.
- Building brand loyalty, which keeps shoppers coming back for more.
- Increased profit margins.
Best practices: 5 tips for food retailers launching a private label line
1. Packaging and labeling
You only have one chance to make a first impression. The way your private label line is packaged and labeled can either make or break your brand, especially in the early months of your launch. Take special care to create a great package and label, and avoid making false claims on your packaging. If you have any questions about whether your labeling contains messaging that isn’t entirely true, consult an attorney.
2. Listen to customer feedback
Fulfilling the needs of your customers is a sure-fire way to build brand loyalty. Shoppers notice when a company listens to their comments and makes the appropriate changes. What are your customers saying about your brand? How can you make your product better? Now go and make those changes.
3. Understand the competition
Retailers typically develop private label products for competitive reasons. To sell the concept effectively, you should know your target retailer’s competitors and how your product will increase their competitive edge. When you approach a company with a private label proposal, show them how and why their target customers need (and will ultimately love) your product. Try using surveys or interviews with potential customers to help reinforce your point.
4. Keep the quality high
Three decades ago there was a distinct quality gap between private label and national brand products. National brands include the incredibly well-known name-brands like Heinz Ketchup, Q-Tip cotton swabs, Kleenex tissues, Campbell’s soup and Huggies diapers.
Today, that quality gap has narrowed. Private label products now maintain a consistently high quality across product categories, making them serious competitors for national brands.
Providing a high-quality private label product can mean that consumers will choose your product over the higher-priced name brand product. Keeping the quality high helps enhance your brand’s perceived superiority, provides the basis for informative and provocative advertising, increases your brand’s sustainable price premium over the competition and raises the costs to private label imitators who are constantly forced to play catch-up.
5. Develop a premium product line
Several innovative food retailers in North America have shown the rest of the private label world how to develop a private label line that delivers quality superior to that of national brands. Take President’s Choice, for example. Parent company Loblaw (which has thousands of grocery stores across Canada) has developed President’s Choice as a premium private label brand of 1,500 items, which includes the leading chocolate-chip cookie sold in the nation. As a result of careful, worldwide procurement, Loblaw has squeezed out some of Canada’s national brands between its top-of-the-line President’s Choice label and their regular Loblaw private label line. President’s Choice has even expanded beyond Loblaws’ store boundaries — 15 grocery chains in the United States now sell President’s Choice products as a premium private label line.
It’s time to start dreaming about the bigger picture for your business. We’re living in a unique time where most shoppers are more price-conscious and make buying decisions accordingly. Launching a private label product line can open up doors for your company that you never dreamed were possible.
Karen and Neil Gwartzman, the creators of the Private Label University® have over 35 years of experience private labeling products and have sold millions of dollars of products in retail and in online sites such as Amazon. They have recently been featured in HER Magazine, Small Business Exchange, CEO Blog Nation and have been training entrepreneurs around the world the secret formula to private labeling. Additionally, they have been guiding countless chain stores and entrepreneurs with sourcing, importing and private labeling products, and specializing in helping entrepreneurs build private label businesses on Amazon. To learn more visit www.privatelabeluniversity.com.
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