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The World of Private Label in the Food Industry: Trends, Pros and Cons

Private label brands, or also known as store brands, have become a trend that is overtaking significant role in the global food market; especially today, when many private label products are becoming premium brands by offering high quality and competing with big brand names.

What is private label? – Generally, products manufactured by one company under the brand of another company are known as private label products. In most of the cases, the company for which the private label product is being produced is providing the manufacturing company with packaging design, packaging weight details, brand name etc. (upon customer’s request, our company offers brand name and packaging design development for free – please read about this in our next week’s post).

“The latest Nielsen statistics reveal clearly that 2015 was a good year for retailer brands in Europe. There were gains for private label in both large and small retail markets as well as in all geographic regions”, says Brian Sharoff, President of PLMA. Following this statement,  the PLMA International Industry News is summarizing some of the Nielsen findings such as:

  1. Volume share climbed to 46% in the UK, reaching its highest level there since 2010.

  2. Volume share climbed by more than 35 % to its highest level since 2012 in France.

  3. In Germany, the market share for retailer brands stayed above 40% for the eighth consecutive year.

  4. Private label now accounts for four of every ten products sold in Austria, and in Switzerland market share has stayed over 50% for more than a decade.

  5. In the north, all four of the Scandinavian countries—Denmark, Finland, Norway and Sweden—posted market share gains.

  6. Volume share has climbed above 30% in Czech Republic, Hungary and Slovakia, while private label share in Poland is now nearly four times as high as when Nielsen first started compiling statistics there in 2003.

  7. In Spain, market share stayed above 50% for the fourth consecutive year, while shoppers in Italy, Greece and Turkey keep putting more private label products in their baskets.

  8. In Portugal, market share remains above 40%.

What are the main advantages of filing stores’ shelves with products featuring your brand name?

1. Control over production: manufacturers work at the retailer’s direction, offering complete control over product ingredients and quality.

2.Control over pricing: having a control over the product ingredients and quality, followed by direct purchases from the manufacturer in bigger volumes, allows retailers to have a bigger control over pricing which means offering more competitive products on shelves.

3. Becoming a market leader: besides offering products at competitive prices, a private label cooperation will offer a possibility for your company to become a market leader in terms of innovation. You will have the ability to move quickly and introduce a new product in response to rising market demand for a new feature, while larger companies offering branded products might not be interested in a niche product or it will take them quite a lot of time until they make all those market analysis and execute the idea. This creates the risk of another company taking the lead.

4. Control over branding: you have complete control over brand name, packaging design, and product weight. Surely we can help upon your request.

5. Higher margin: thanks to the control over product costs and pricing, you

r company can reach higher margins in comparison to branded products.

Certainly there are some disadvantages too like for example:

1. Manufacturer risk: since the production of your private label product is in the hands of another company, surely there’s always a risk related to product delivery, standard quality and increase of prices. However, this risk can be reduced even eliminated when cooperating with well established companies having a good reputation and experience in private label.

2. Brand building challenge: Developing a new brand in the highly competitive food market is quite of a challenge. Moreover, creating a brand loyalty is taking time, patience and investment in promotions and different types of advertising which is on retailers’/ clients’ shoulders. However, if the partnering manufacturing company provides great products, standard quality at competitive prices and all these packed in an attractive design, your team will find the motivation and tools to successfully create your brand accompanied with strong brand loyalty.

There might be some other threats and risks depending on your manufacturing partner, however these two are the most common risks that generally apply to every private label project.

Next week we’ll publish a post telling you how our company, Via Prom, can help you eliminate the common threats when developing own branded cream cookies (sandwich cookies). Stay tuned. 

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