Functional CPG Brands Should Fear 'Private Label 3.0' | CPG Industry Strategy

Even as food inflation moderates slightly, private-label brands continue to pose an expanding level of competitive threat to functional CPG brands. What? Why would a functional CPG brand be worried about competition risk from private-label products? They are just cheaper basic versions of national brand products anyways, right? While those cheapest copycat focused private-label brands like Great Value at Walmart or Market Pantry at Target are still thriving, those (and many more) would be bucketed into what I consider private-label 1.0. What happened next...was that economic conditions from the Great Recession caused shoppers (especially Millennials) to get even savvier. Because of this, they were more willing to give private-label brands a chance, despite growing up in a family that consistently bought branded CPG products. Retailers took advantage of that and invested heavily into store brands and shifted their private-label product development strategy away from imitation and into creating innovative products of their own. Retailers did not only change the ingredients of the products, but also have started entering very small and sometimes experimental segments. Thus, private label not only helps with better-priced alternatives to common products…but allows a consumer to enter premium, niche categories without compromising their spending. This maturation in everything aspect of private-label products is what I consider private-label 2.0. It seems that in today’s CPG business landscape…the competitive clash between premium-positioned branded CPG products and retailer private-label brands seems to be at an all-time high. But what if I told you things are going to get tougher! We are about to start the private-label 3.0 era, and I have the playbook that every premium CPG brand needs. Private labels will continue adapting to the changing consumer landscape, be it a surge in demand for traditional value-orientated solutions, or requests for something beyond the historical standard. It seems without a doubt at this point that retailers will continue to maneuver within the set of different price-tier solutions…with more premium private label products being developed to enter various niches. So, don’t get caught overlooking those same retailers that are your wholesale customers when doing competitive analysis…because they are equally a threat to your fellow functional food, functional beverage, and supplement brands.

#privatelabel #supplements #strategy

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About Joshua Schall of J. Schall Consulting:
Joshua is consumer packaged goods (CPG) Strategist and Entrepreneur that focuses on the product categories of value-added (or functional) food, beverage, beauty, and nutritional supplements. He was an early advocate for digital grocery optimization and is an expert at the entrepreneurial ideation to consumerization cycle. Recently, he has shifted that decade of knowledge into early-stage investments, board membership, and public speaking engagements. His YouTube channel is a walk through his daily life and a peek into his business musings. Enjoy a look into his life through the lens!

[JoshuaSchall]

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[josemora]

You mention big retailers as the ones driving 3.0. What do you think about online only private label brands? Those can offer even lower prices