What is the best strategy for building your small business’s brand? Should you build your own brand with consumers or supply a retailer with product for their private store brand?
While most small businesses should build their own brand, you may want to seriously consider recent changes in consumer appetite for private labels at grocery stores. Private label brands continue to gain ground. The trend started during the recent recession and is still increasing.
The 2014 Deloitte American Pantry Study surveyed 4,025 American adults about 375 brands in 30 categories.
The biggest change uncovered by the study is that nine out of ten consumers like store brands. That is, they view private label brands as good or better than national brand products in 28 of 30 categories. One in five private label brands are actually preferred over the national brand equivalent.
Consumers are least likely to care about brands in bottled water, disposable paper products, food storage, deli meats, condiments and salty snacks. Categories where brand still consistently matters are beer, soft drinks, pet food and coffee.
According to a Private Label Manufacturers Association report at the end of 2013, store brands are at a record high. Now private label products account for a 19.4% market share. Ten years ago in grocery stores 16% of products were private label and that held relatively steady until three years ago.
The growth is even faster in drug stores where private brands’ share is up 9% in the last three years.
Take a look at a grocery retailer whose strategy is focused primarily on private store brands: Over 80% of Trader Joe’s 2,500 SKU’s are their private label.
Trader Joe’s does not copy national brands with their own version at lower price. Instead their interesting strategy is to find out what consumers want in their target market and then source the private brand to fill the consumer need with a high-quality product at value price point.
The strategy is working. Trader Joe’s has been growing at 21% per year. There is a good chance a Trader Joe’s has recently opened near you. They have added almost 200 stores in the last ten years.
You can read a case study about one of our clients that has pursued a focus on supplying private label fashion products by clicking on this link – Global Design case study.