By Doug Baker, Vice President, Industry Relations - Private Brands, Technology, FMI
The private brands industry is well positioned to gain ground in 2020.
Why do I feel so positive about the outlook? It’s because of a growing private brands commitment and strategic positioning by food retailers.
These emerged in findings from two 2019 FMI research pieces: The Food Retailing Industry Speaks, and The Power of Private Brands-From the Industry.
Benefiting From Growing Commitments
The industry is prioritizing private brands through further commitments to space and SKU allocations. These commitments are very good indicators of category momentum.
Some 58% of food retailers surveyed for Speaks are planning increases in space allocation to private brands over the coming two years. Only 2% anticipate a decrease, and 35% said it would hold steady. The picture was equally bright for anticipated SKU allocations.
These forecasts underscore that retailers are committed to turning over more of their valuable real estate to private brands. Retailers recognize that private brands drives exclusivity, loyalty and the overall business.
Leveraging Consumer Trends
The private brands industry is staying on top of key consumer trends. A case in point is health and well-being.
This trend was ranked considerably higher than before on the list of top private brands growth opportunities cited in the Industry report. Health and well-being also figured in other highly ranked opportunities, including fresh foods and simple/clean ingredients/free-from.
As the Industry report noted, health and well-being means different things to different customer bases. Each retailer needs to figure out the relevancy for its own shoppers.
Growing Experimentation
The 2019 Speaks research found retailers are widely experimenting with ecommerce strategies. The private brands industry understands the importance of this experimentation.
Home delivery and click-and-collect internet sales were identified as important growth opportunities by more than half of respondents in the Industry report. This indicates private brands executives view ecommerce more as an opportunity than a threat.
National brands are sold on a growing range of platforms, but a retailer’s private brand is available only on that retailer’s own platforms, which include ecommerce. Retailers rightly view this as an opportunity for competitive differentiation.
Driving Innovation
Even as the private brands industry advances, it seems to remain humble. In the 2019 Industry research, trading partners were asked to judge their organization’s private brands innovation levels.
Only 14% said their organization’s private brands are leaders in innovation. That compares to 33% saying follower, and 54% saying in the middle.
These results make it seem the industry is very self-critical. But keep in mind that until the recent era of innovation, private brands was known as a “fast-follower” business. So given that lens, it’s not surprising that most respondents identify their organizations as somewhere between innovation leader and follower.
In my view, the long-term trend is clearly moving towards leader. I don’t mind that the industry is humble. It indicates retailers and suppliers won’t be fully satisfied until they drive innovation further.
There are a number of reasons to feel good about the upcoming prospects for private brands. Among the biggest are the commitment and drive of industry leaders working to build on successes.
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