Trendspotting: Private Labels Go Premium

NewsWire: 6/02/21

• The nation’s biggest retailers are in a race to upgrade their private-label brands. Store brands are angling for deal-seeking customers with better packaging and premium ingredients. (The Wall Street Journal)
• NH: In 2017, we took our first deep dive into the rise of private label brands. (See “The Ebbing of Brand Equity.”) Since then, retailers have upped their game even more. Increasingly, private label brands are seeking to match the major labels in all respects except for price. That means eye-catching packaging, high-quality ingredients, and revamped brand names like Good & Gather (Target/TGT) and Live Better (CVS).
• The new designs showcase all of the premium buzzwords: artisan, organic, vegan, dairy-free, gluten-free, no BPA, no artificial flavors or preservatives, etc. ShopRite swapped the shiny finish of its potato chip bags for a matte finish to match the look of its pricier competitors. CVS changed its private-label packaging to include information about where their products are sourced and how they’re sustainably manufactured. The new packaging is also recyclable, of course.
• The push into upscale private label encompasses all kinds of product categories that reflect broader buying trends. Beyond just giving their existing brands makeovers, retailers are strategically carving out their own territory in potentially high-growth categories. Target’s Good & Gather just rolled out a new subcategory devoted to plant-based foods. Walmart (WMT) recently launched its own line of high-end pet foods. Nordstrom (JWN) is introducing a new collection of gender-fluid clothing for young adults.
• Retailers’ investments are paying off. Private-label product sales rose to a record $158.8 billion in 2020, up 11.8% YoY, according to a new study by NielsenIQ and the Private Label Manufacturers Association.
• Atypically for a recession year, 2020 treated the big brands pretty well. Most households had money to spend and were willing to splurge on "quality" for the family. (See "Why P&G's Sales are Booming.") But private labels are competing hard not to lose ground. They may be well-positioned for the dawning post-recession mood--since the recovery may turn out to be as weird as the recession itself.