How Retailers Can Accelerate Their Private Label Brand Growth | 5IM

Joining us now for five insightful minutes is the managing director at the A and M Consumer and retail group, Marco Valentini.

Marco will be discussing with us the results of his company's most recent report on how retailers can successfully build and foster a strong own brand strategy.

Marco, first question for you today.

Why is it important for retailers to invest in private brands?

Yes, we're seeing a strong growth of private brands in the market.

Private brands continue to outgrow national brands and they continue to be a differentiator for many retailers and their offer.

The private brands today represent roughly 20% of food in the US, and this trend is continued.

This penetration has continued to grow over the last ten years and is expected to achieve 24% by 2030.

We are also seeing private brands continuing to outgrow national brands at roughly the rate of 400 basis points.

That means that think about every year, roughly $1.5 billion are shifting from national brand to private brands.

So there's a clear opportunity in terms of market share there to capture growth that ultimately is not accessible for many retailers.

Marco, I know why I love private brands, part of that reason being the value component of that.

But why do you feel like customers really love those private brand options?

Yeah.

Customers are often loving national brands, private brands even more than their national brands equivalent.

They, in many cases, the customers cannot distinguish whether a brand is owned by a retailer or a national brand.

And you have many examples of brand that have highest level of advocacy and love from customers.

Think about the trader Joe's assortment or Kirkland from Costco.

These brands are highly recognized and they not just provide value, but they also provide the highest level of differentiation and innovation for the customers.

I would say that very often the minimum condition is to provide a 30% to 40% price positioning below the national brand equivalent with the same level of quality.

This is kind of the traditional positioning of national brands.

But the most successful players have been able to innovate and also add the highest level of differentiation, innovation through, for example, unique product ranges, unique flavors, unique packaging, or capturing specific pocket of demands that are not normally served by national brands.

Think about retailers, for example, that developed organic ranges, for example, 365 from Whole Foods.

Or think about retailers that have been able to develop premium ranges.

Think about private selection of Kroger.

Got it.

All right, Marco, let's get you out of here on this.

So, for the average c suite executive listening to this podcast, what should they do to accelerate their private label brand growth?

Yeah, that's a very good question, Chris.

It requires quite a lot of focus and discipline.

Right.

I think the most important aspect of this is to build commitment throughout the leadership team within the organization.

You know, firstly, at the chief merchant level, chief merchants have to treat private brands with the same level of attention to detail or even higher that they use.

For national brands, this is not just about setting up targets, but it's also being consistent and having a year round commitment around, for example, product innovation, planograms, promotions and so on and so forth.

You need to have strong support from all the other functions.

Think about supply chain to ensure availability of the product, procurement, to kind of have the right vendor partnerships and ultimately the execution in the stores.

Marketing has to be highly engaged to provide focus and investment to the development of the brands.

Ultimately, the commitment to private brands have to start at the CEO and CFO levels because they have to be able to align the entire leadership team of the organization around a shared goal and also a clear set of KPI's and targets.

The investments have to be measured to the ambition and the private brand teams have to be right sized and at the same time empowered to drive change.

You need the dedicated investments in branding, in marketing, but also in, for example, developing production capabilities with some of your suppliers.

I mean, in essence, private brand development today is more an imperative than an option for many grocers and you really need strong commitment from the entire organization.

But the good news are that the players that are able to achieve that positioning very often are delivering stronger market results and at the same time, strong shareholder results.

Thanks Marco.

Great.

Thank you Marco.

And remember, if you're interested in reading the A and M consumer and Retail group's full report on how you can accelerate your private label brand journey, just check out our podcast description where you'll find the link.

Or you can also head to Omnitoc blog.