How to Continuously Improve the Value of your Private Label Brand
July 10, 2023
Private label brands have experienced a surge in popularity with consumers, particularly since the increase in inflation. In this article, we will discuss ways in which your private label brands can become more profitable and valuable to your business:
- Improved product quality and transparency
- Gaining a competitive advantage through brand and consumer loyalty
- Increased control over pricing
Establishing the value of your private label brands now will help ensure your consumers stay loyal to your brand when inflation becomes less of an issue. According to a recent blog from FMI, 87% of all shoppers consider “getting good value” when shopping for food and groceries a high or top priority. The same blog also mentions that 34% of grocery shoppers state that they get good value when they can find a high-quality store brand.
How Private Label Brands Can Improve Product Quality and Transparency
Private label brands provide grocery retailers the opportunity to differentiate themselves from competitors by offering superior quality products to what might be found in other stores. By focusing on the quality of their private label brands, retailers can create a sense of loyalty among customers who specifically seek out high-quality products.
One grocery shopper we spoke with noted that they had been paying more for their favorite brand of organic greens but started noticing quality issues with that brand. They tried the less expensive private label brand of organic greens and were not only pleased with the level of quality but also the value. The quality of the product remains high, and they are saving almost $3 per bag.
Here are three ways retailers can work to meet or exceed consumer expectations in terms of quality:
1. Partnering with Reliable Suppliers.
To improve or maintain the high quality of your private label product, retailers can continue working with suppliers who have a history of providing high-quality produce. It is critical to record quality data and share produce quality insights to strengthen supplier relationships.
Making data-driven decisions helps ensure the sourcing of fresh, wholesome, and sustainable produce. In a recent FMI blog post, it was noted that over the past 40 years, private label brands have grown to exceed 20% of sales on average, shifting the leverage from national brands to retailers. That shift in leverage has made the relationship between suppliers and retailers much more dynamic in recent years. This recent article from Progressive Grocer on Private Label Innovation refers to a case study in which it’s noted that 80% of the food industry executives who responded to a recent survey done by FMI felt that engaging more closely with existing suppliers was one of the best ways to improve innovation of private label products.
2. Implementing Traceability Processes and Sharing the Brand Story.
Private label brands can meet consumer expectations and protect their brand by implementing end-to-end traceability. In the event of an outbreak investigation, a food traceability system can help you understand and mitigate the impact on your brand. End-to-end traceability can also help ensure sustainability practices such as organic farming, fair trade, non-GMO, and other claims live up to their promise.
Traceability solutions can also be extended to the item level, enabling you to share the full story and value of your brand with consumers. For example, if you are sourcing the highest quality from trusted suppliers, share origin information with your consumers.
There are a myriad of ways that traceability in the food supply chains can benefit grocery retailer brands. To learn more, check out our article on “3 Ways End-to-End Traceability Benefits Grocery Retailers.”
3. Ensuring Suppliers and Other Supply Chain Partners Conduct Regular Food Safety and Quality Inspections.
Higher quality can also be attributed to adhering to good manufacturing practices (GMP), following safety protocols, and implementing quality management systems to provide safe, high-quality food. Having the right quality solution in place can help improve and manage processes.
Maintaining stronger supplier relationships and managing quality, traceability and food safety processes can be tricky without the right systems in place. It’s important to have technology you can rely on to efficiently and accurately maintain digital records that can easily be pulled into reports and dashboards for useful insights. With the right processes in place, retailers and their supply chain partners can feel more confident in developing and growing their private label brands in the produce and other fresh food departments.
How to Use Your Private Label Brands to Gain a Competitive Advantage
When retailers consistently offer quality private label products, customers develop trust in the retailer’s brand. Positive experiences with high-quality, private label brands lead to increased customer loyalty as shoppers perceive the retailer as a provider of reliable and affordable options that match or improve upon the quality of national brands. This loyalty can translate into repeat visits and increased overall spending.
By developing innovative and high-quality products, retailers can attract customers who are looking for value and differentiation. Private label brands also help retailers establish themselves as destination stores, reducing customers’ reliance on competitors and increasing market share. Providing customers with opportunities to sample private label food items can be an effective way to overcome initial hesitations and encourage trial purchases. Retailers can:
- Organize tasting events
- Offer free samples
- Provide special discounts on private label products for a limited time
This allows customers to experience the quality and taste of the items firsthand, potentially leading to increased sales and repeat purchases. Encouraging sales of specific items can help reduce shrink and food waste while providing a positive experience for consumers.
Private label brands provide an opportunity to focus on transparency and accurate labeling, including detailed ingredient lists, nutritional information, and any relevant certifications or quality assurances. This helps consumers make informed choices and builds trust in the brand.
How Private Label Brands Can Use Pricing and Availability to Their Advantage
Private label brands generally have higher profit margins compared to national or branded products. Since retailers have more control over the entire supply chain, from sourcing to distribution, they can reduce costs and increase profitability. Retailers can either pass on the savings to customers or retain higher margins to reinvest in their business.
Some examples include:
Private Label Brands Offer a Level of Protection and Negotiation Power
Private label brands provide retailers with a level of protection against price fluctuations and supplier negotiations (negotiation power). By having their own brands, retailers have more leverage when negotiating with suppliers of national brands. They can also mitigate the risk of competitors directly influencing prices or reducing margins.
Private Label Brands Help Reduce Waste
Using private label brands where margins are already higher offers the flexibility to quickly bring in new product, or donate product sooner or mark it down as it approaches its best-by date (since margins are already higher) and using technology to do so. Retailers can reduce waste and meet consumer expectations by:
- Quickly introducing new products they don’t normally sell but become available as a unique offering to consumers.
- Responding to changing consumer demands by working with suppliers to bring in new product or reduce volume on product that isn’t selling.
- Finding alternativeways to use product that would have otherwise gone to waste and doing so more efficiently than national brands.
While consumers look for quality in their product, especially fresh foods like produce, meat, and dairy, they also appreciate value. FMI noted in a recent blog on value that 33% of grocery shoppers feel that they get good value when they can purchase a high-quality product at a good price. Maintaining a certain level of control over private label brand pricing can be extremely beneficial to retailers when it comes to both meeting their bottom line and meeting consumer expectations.
Private label brands offer grocery retailers the opportunity to provide high-quality products, build customer loyalty, maintain a competitive advantage in the market, increase profitability, and reduce waste. By investing in the development and promotion of their own brands, retailers can strengthen their position and drive growth in a highly competitive industry.
Having the processes in place to manage and maintain your private label business is crucial to its success. Having the right technology solutions in place can simplify processes, give you better visibility across your supply chain, and help you gain valuable insights into the quality and safety of your product. Learn more about how iFoodDS can help.