In recent years, private brand sales have seen a remarkable increase, shaped by supply chain challenges during the pandemic and unprecedented price hikes. However, the landscape of private label sales is evolving. Retailers are now striving to offer unique assortments that represent high value, allowing them to stand out from national brands and attract shoppers looking for different choices. According to Doug Baker, VP of Industry Relations at FMI – The Food Industry Association, the private brands sector has become crucial for growth and a key area of investment for retailers and manufacturers alike.
The findings from FMI’s “The Power of Private Brands 2024” report underline a significant shift in consumer behavior. As of June 30, private brand products accounted for 20.9% of dollar share and 25.8% of unit share. This means that one in four products purchased in stores is now a private label item, a trend expected to continue upward based on retailer feedback. An impressive 84% of retailers and suppliers surveyed believe that private brands are vital to their operations, and 93% are planning to increase their investment in private labels over the next two years, a rise from 82% in 2023.
While price and perceived value remain foundational for the success of private labels, consumer acceptance has opened the door for new growth opportunities. The survey identified premium offerings, best value, health and well-being, clean ingredient products, and frozen foods as the top five categories for future growth. Baker notes that increased consumer spending on private brands, coupled with enhanced investment from retailers, signals a robust opportunity for development over the coming years.
The importance of connecting with younger consumers cannot be overstated, especially as Generation Z is proving to be less attached to traditional legacy brands compared to prior generations. Markenson, VP of Research and Insights at FMI, emphasized that Gen Z is willing to explore and try different experiences, especially in terms of flavor diversity. Given their generally lower disposable income, budget considerations are crucial; however, these consumers are equally interested in the values embodied by brands.
This demographic, known for their preferences for authenticity and sustainability, wants to understand what a brand stands for. They gravitate towards products that align with their beliefs and lifestyle choices. This shift presents a unique challenge for retailers to reformulate their marketing strategies. Successful outreach to Generation Z involves creating a compelling narrative that resonates with their values, while also offering quality products at accessible price points.
Despite the positive outlook for private label growth, the industry faces challenges around domestic manufacturing capacity. Baker pointed out that the U.S. lacks sufficient manufacturing resources to keep up with the increasing demand and innovation necessary in the private label sector. While many brands are produced domestically, there is a pressing need to look at global manufacturing partnerships to meet market needs effectively.
Retailers and manufacturers have engaged extensively in discussions within FMI’s Private Brand Council to address this challenge. After all, as the demand for private label products continues to expand, committing to both local and international partnerships will be key in fostering innovation and keeping shelves stocked with diverse product offerings.
In conclusion, the positive trajectory of private label growth is evident with increasing consumer acceptance and retailer investment. Responding strategically—especially when targeting younger consumers—while addressing challenges in manufacturing capacity will ultimately define the future dominance of private brands in the retail space. As businesses work to enhance their product assortments and strengthen connections with consumers, they will likely uncover new avenues for sustained innovation and growth.
