The perception or image of private label brands has evolved from being seen as a cheaper or lower quality alternative to now being seen as reliable products, even superior to national brands. One in four products sold in the US is now private label, and a new peak for private label brands was reached in 2022, with sales in retail channels reaching $228.6 billion.
And they continue to grow in popularity – in the first three months of 2023, private labels saw a 10.3% increase in sales, almost twice the gain of national brands. With this growth, more and more private labels are diversifying and expanding their portfolio.
A particular area of focus is in the health and wellness sector, with around 50% of consumers now saying that wellness is a top priority in their lives. Everyone has their own idea of wellness and makes food choices based on their individual goals and desires. Recently, many have committed to clean eating, and as a result, demand for organic foods has doubled over the past 10 years, with sales reaching $62 billion in 2020.
People are also adopting new diets: plant-based eating has increased, as have dietary trends such as Keto, Paleo, Mediterranean, and Whole30. And with these trends come various private label opportunities. Some are already starting to offer products that accommodate certain diets, such as Kirkland Signature’s keto-certified snack mix. Other private brands include mentions, and some have symbols signaling these dietary trends on their packaging. However, there are other, more impactful steps brands can take to increase their market share in the health and wellness sector.
The option of own-brand healthy ranges
While we are witnessing the evolution of private label brand offerings, most have some catching up to do in terms of branding and marketing. Financial issues are on the minds of many shoppers and brands are acknowledging this through their own brands.
However, cheap signs should no longer be the center of gravity for private food brands. People now know that private label offers more competitive prices, so brands no longer have to accept only white or neutral packaging to signal value. It fails to capture the attention of buyers and makes them focus only on the price of the product.
This contrasts with what we see in other markets, such as the UK, where there is boldness and style in their own brand ranges. Marks and Spencer’s is a great example of a company that knows how to create powerful own brands. For example, its plant-based private label, Plant Kitchen, has distinctive branding and packaging that stays true to the brand’s high-quality look, yet at an own-brand price point. It clearly tells a story and in many cases is even more thoughtful than its brand competitors.
Food retailers in the US are starting to make headway in this area. Target has stepped up with its own food brand, Good and Gather. His decision to invest and double down on his brand, folding Archer Farms and Simply Balanced, created a bigger, more formidable opponent to the national brands. And importantly, this strategy clearly communicates Target’s position on healthier foods.
365 by Whole Foods is another private label brand committed to being good for the environment and good for customers. Since being acquired by Amazon, the brand has increased its list of banned ingredients, which includes high-fructose corn syrup and certain meats containing antibiotics, as well as other enhanced products.
As the popularity and spread of healthier options grows, there are still opportunities for retailers in this area. Retailers need to have fun with their healthy private label ranges and break out of standard category conventions.
They should take a lesson from some of the newer health food brands. The high-protein, low-carb Magic Spoon brand is a great example. It has created a colorful, illustrated brand that feels like a modern version of a children’s cereal and is distinctive, while at the same time the nutritional value of its products is clear and recognizable. And what a success it has been, going from an online D2C brand to being offered in over 6,000 stores.
National brands have created healthy competition
When it came to healthier foods or those centered around health, earlier, smaller, independent brands were nipping at the heels of private labels in the same category. Now, however, larger CPG companies have entered the game to deliver exactly what consumers are looking for.
Who knew such a strategy would work for them? Many have accelerated this by acquiring well-respected brands—General Mills bought the organic food brand Cascadian Farm as well as the all-natural brand Annie’s, Mars acquired Kind, and PepsiCo bought the roasted fruit and vegetable brand, Bare.
As national and global brands increase their healthy offerings, private label brands must step up – by innovating and leading trends rather than following them, and making marketing and branding a higher priority to continue to build trust, stand out and ultimately, lead.
Delivery of healthy meals
My own, recent move in my wellness journey was joining a food delivery service. BistroMD, a healthy meal delivery service, has always served me well in the past, but there are many newer brands that have emerged such as Factor, Trifecta Nutrition, or Marley Spoon, which delivers meal kits that can be prepared in 30 – minute recipes. And others cater to healthy eating trends, like Green Chef, which offers paleo and keto options, or Sakara Life, a healthy and organic plant-based food delivery service.
It is only a matter of time before the parents of the national brand start investing in this area. If retailers introduce just one new item to their own-label healthy ranges in 2024, they should consider adding one of the many food delivery companies to their portfolio, especially as many have the advantage of having kitchens in their facilities.
Retailers need to keep up with the latest health and wellness trends, make moves to lead rather than follow, and at the same time move away from category clichés. If they don’t, they’ll miss their chance, others will step in for them, and the opportunity for healthy, health-oriented foods will pass them by.
As President – USA, Jen Szekely leads Collie Porter BellNorth American business and select customers. She brings more than 20 years of B2C and B2B branding and marketing experience across industries from retail to rocketry. Szekely is passionate about the intersection of brand and business strategy and the power of brands to drive employee growth and engagement, as well as the role of brand architecture and brand management.