Why this is important to Wisconsin businesses: Wisconsin companies can act as suppliers for retailers' private label products.
A Canadian Grocer article from July 2018, “The Rising Power of Private Label,” indicates that private label store brands are rising in popularity among Canadians, logging five years of consistent growth and retail sales of $14.4 billion in 2017. Canadians named price, trust and previous experience as key factors in their decision to buy private label products.
Millennials represent a major growth opportunity for private label brands. A U.S. study by Cadent Consulting Group found that just over half of millennials (51 percent) said they have no preference for private label versus national brands, compared to 39 percent of baby boomers who gave the same answer. The study concluded that a store brand with two years of transparency, trust and clean labels can do extremely well relative to name brands.
The private label model can have some major advantages:
- The revenue stream generated through private label can be used to offset some of the costs of growing your own brand.
- From an operational standpoint, if your manufacturing facility is not running at full capacity, it is a drain on your finances. Increased production volume (in the form of private label production) can use up excess plant capacity to help cover your overhead costs.
- Keeping the cost of goods in check is an ongoing challenge for manufacturers. Incremental volume from private label sales can provide leverage to negotiate lower ingredient and packaging costs.
- If supplying major grocery retailers like Loblaws, Sobey’s or Metro, the private label model can get your product on the shelf without having to pay listing fees. Since their portfolios are already well developed, these chains need products to fill gaps, unique items that are on trend, or lower-cost alternatives.
- With respect to product formulations, retailers may accept a manufacturer’s formula or request the development of a proprietary formula to provide a point of differentiation from their competitors. Having access to a retailer’s product development and quality assurance expertise is a learning opportunity that can be applied to improving other parts of your business.
- Major grocery retailers require their suppliers to be certified under a Global Food Safety Initiative (GFSI) like BRC, SQF or FSSC 22000. This can significantly reduce business risks such as recalls and protect your brand as well.
Major retailers are getting very creative with health-conscious brands. A vendor for private label may contribute an ingredient which could be incorporated into the final product. Below are some examples of recent successful private labels by top Canadian retailers:
- Sobeys recently launched three varieties of frozen, plant-based burgers under the Compliments brand: carrot and sweet corn burger, beet burger, and green bean and pea burger. The company also looks for “white space” categories where it needs more presence, such as baby food. One recent example is the new Compliments (Sobeys private label) organic baby food pouches.
- Metro is another retailer focused on private label products that fit with healthy lifestyles. Last year, Metro launched Naturalia, a line of about 100 products under its premium Irresistibles store brand. Metro also has its Selections brand, a national-equivalent brand. Naturalia products, which focus on simple ingredients with nothing artificial, range from all-natural peanut butter to grain-fed chicken.
- Longo's private brand Signature is found in all departments, but is especially strong in the fresh food, bakery and deli categories. Longo’s recently won Product of the Year for its signature chocolate truffle mousse cake. The grocer also recently launched its new Impress line of eight chef-inspired meal kits, which come with pre-portioned ingredients and preparation instructions.