The Private Label Revolution: Is Your Brand Ready?

Consumers are ditching brand loyalty for value. Private labels are on fire and established brands are feeling the heat. To survive, you need to understand your customers better than ever.

Inflationary periods can be challenging for consumers and businesses alike. Rising prices are squeezing wallets, forcing consumers to become smarter shoppers. This could spell trouble…or it could be an opportunity. In the consumer packaged goods (CPG) industry, budget-conscious customers are flocking to private-label brands for the cheaper cost. 54% of consumers plan to buy more private label brands in the coming year, according to FMI. That’s double the number eyeing national brands (26%). But there’s a flip side: they are also craving quality they can trust, which usually only comes from established brands. This dynamic is particularly evident in the retail and CPG landscape, where the threat of private labels, also known as store brands, looms large.

No longer bargain bin options, private labels have undergone a remarkable transformation in recent years, offering quality that rivals big brands, often with sleek packaging and strategic marketing muscle behind them. Retailers have invested heavily in their house brands, leveraging economies of scale and strategic partnerships to create products that are largely indistinguishable from national brands.

Private label sales are booming, jumping 6% to a staggering $217 billion in 2023, according to a recent report from Circana. While unit sales stayed flat, their market share skyrocketed, taking a bigger bite out of national brands (25.5% vs 24.7% in 2022). Why the shift? Quality is on par and prices are friendlier. Millennials and Gen Xers without children are leading the charge, grabbing 36% of private label food and beverages. Is your brand ready to compete in the new era of value-conscious shoppers?

It’s worrying for big brands that more than half of consumers plan to buy more private label brands. Is it just rising prices pushing shoppers away? Maybe. But the quality gap is closing fast, making private labels a more attractive option. Are your brand’s days numbered, or can you adapt to win back value-conscious consumers?

The growth of private labels

Target’s private label strategy is a prime real-world example of retailers investing heavily in their house brands to create products indistinguishable from national brands.

Target has about 50 private-label brands across various product categories, including clothing, home goods, electronics and groceries. One of its most successful private label brands is “Archer Farms” for grocery items. Archer Farms offers a wide range of premium-quality food products, including snacks, coffee, sauces and frozen foods. Target has leveraged its strong relationships with suppliers and manufacturers to ensure that Archer Farms’ products meet high-quality standards while maintaining competitive pricing. Target launched two more brands in 2024: Dealworthy, a basics brand, and Gigglescape, a toy brand. It also relaunched its Up&Up brand of home essentials. Target’s private labels cater to many consumer needs, proving value doesn’t have to skimp on style or quality.

Another example is AmazonBasics, which offers a wide range of everyday products such as batteries, chargers, cables and office supplies. Amazon knows exactly what its customers buy and why. They use that data to create high-quality AmazonBasics products that go toe-to-toe with national brands. Think designer quality at a fraction of the price, all backed by Amazon’s vast supplier network. Are you ready to compete with Amazon at its own game?

Consumers are getting smarter. Why pay a premium for a name brand when private labels offer similar quality at a lower price? This is the harsh reality facing CPG brands. Loyalty is wavering and the game has changed. It’s time to adapt or risk getting swept away by the tide of private label popularity.

How to differentiate: Getting the right data to reclaim your competitive edge

Putting the customers’ needs at the center of their strategies is paramount for name-brand CPG companies looking to maintain a competitive edge. This means not only understanding consumer preferences and behaviors but also anticipating their evolving needs and aspirations. But how do you track those preferences and behaviors across in-store and online shopping?

Cutting-edge tracking programs integrate disparate data streams across brands, audiences, tactics and outcomes. The goal is to unify measurement, moving from fragmented brand monitoring to active brand management. A robust suite of metrics is required to leverage the ones most suitable to your brand while not over-emphasizing those less relevant to your brand, consumers or category. This involves tracking key metrics such as brand awareness, brand loyalty and brand sentiment to gauge how products are perceived in the market relative to private labels and other competitors.

These three areas of high-level measurement link to brand growth:

• Consumer attachment and love toward the brand
• Consumer advocacy for the brand
• Consumer relationships and experiences with the brand

In addition to proactive brand tracking and customer-centric strategies, closely monitoring perceptions of themselves and their competitors over time is crucial for CPG companies. By gathering and analyzing data on consumer perceptions, companies can identify areas for improvement and adjust their strategies accordingly.

At Material, we view tracking as an integral component of our larger ongoing insight-generation programs and insights infrastructure. Our purpose is to help clients across all industries grow their brands via our science-backed principles and tracking is a means to that end, meaning you can’t grow your brand unless you’re very smart about it. Just like an airplane will fail without a comprehensive set of controls and warning systems, brands will fail if they are blind to what the market requires and demands.

We cut through the data clutter and turn insights into action. We integrate online and in-store insights to give you a complete picture of your brand health. Forget vanity metrics – we focus on what truly matters: brand awareness, loyalty and sentiment. With our proprietary science-based approach, we unlock the secrets of consumer behavior, paving the way for nimble actions and continuous learning. Are you losing ground to private labels? We’ll help you identify weaknesses and adjust your strategy in real-time.

In conclusion: Reaffirming your value proposition

Ultimately, the threat of private labels in an inflationary period should serve as a wake-up call for CPG companies to reevaluate their approach to branding and customer engagement. By investing in ongoing brand management and tracking, prioritizing the needs of their customers and closely monitoring market perceptions, CPG brands can position themselves for success in an increasingly competitive landscape. In doing so, they can reaffirm the value proposition of their branded products and maintain their relevance in the eyes of consumers.

It’s time to reimagine your brand strategy for the new value-conscious consumer. Material can help you track your brand health, turn those insights into measurable business results, understand your customers and regain your edge. Ready to reaffirm your value proposition and reclaim your competitive edge? We’ve done just that for the leading CPG brands and we can do it for yours. Reach out to learn more.