What is Private Label food? Why has it Become a Trend?

Private label foods, in essence, retailer’s own brands, have catapulted in popularity with consumers in the past few years. This post-COVID-19 and high inflation era trend is driven by the cost of living and supply chain issues, as well as by consumers making more sustainable choices.

A soaring market trend of private label demand provides retailers with an opportunity to capitalize by increasing production and adding new product ranges.

By adopting innovative food and beverage micro-factories for hyper-local production, retailers can step up this trend with more sustainable private label products. Private label products processed or packaged on-site at retail or distribution locations eliminate supply chain weaknesses, enabling circular economies and local product purchasing at scale.

Before we explore food and beverage micro-factories as a solution and opportunity for retailers, let’s understand the private label market and its drivers.

How often do you buy private label, also known as storebrand, food products?

What is Private Label Food?

Private label foods are produced exclusively by a retailer or their chosen wholesale partner. The brand, packaging, supply chain, ingredients, and, indeed, price are all owned and decided by the retailer. This is generally true, although there’s a grey area where contracted manufacturers may produce both private labels and other brands.

With innate insights into what sells and what doesn’t, and at what price, retailers have increasingly responded to consumer demand with a range of private label foods, from basic to premium own-branded products.

A Soaring Private Label Trend

The U.S. FMI—The Food Industry Association published a “Power of Private Brands 2023” report that found over 95% of consumers are buying private label products at least occasionally but that a substantial 46% are purchasing store-brand items most or all of the time.

FMI discovered that private label adoption had increased over the twelve months prior to the report, with 61% of consumers saying they were purchasing more store brands. In addition, 53% of consumers said private label goods were “very or extremely important” in their decision about where to shop. This metric is up from 35% in 2016, and 46% in 2019, per Food Business News reporting.

According to The Food Institute, 2023’s Private Label Manufacturers Association (PLMA) annual trade show in November saw a record 1,600+ vendors and over 10,000 private label products in what was dubbed “The Year of the Private Label.” The show theme was “The Store Brands Phenomenon.” Data from Circana shows store brand sales were up 5.9%, compared to 4.3% for national brands, in the first nine months of 2023. Daymon's research revealed that 91% of consumers who were concerned about food prices planned to change their purchasing behaviors, including moving to private label foods.

People are buying more private label products (Source: FMI, The Power of Private Brands 2024)

Why the Private Label Trend?

Inflation and the cost-of-living crisis, on top of COVID-19 and other supply chain impacts, are driving both demand and the innovation of private label foods. However, these aren’t the only reasons, Jim Griffin of Daymon North America told The Food Institute:

“Beyond price and value, 63% (of shoppers) said a top reason why they are purchasing more private brands is because of improved quality. As best-in-class retailers continue delivering world-class private brand assortments, they are doing so by pushing innovation while also delivering against quality expectations, prompting a shift that has raised the bar for consumer interest, heightened perceptions, and overall desire for private brands.”

PLMA president Peggy Davies added that “millennials grew up with store brands” and see them as true brands with appealing attributes. Griffin agreed, saying a transformation is occurring where products are becoming brand alternatives, developed against consumer insights and with “true differentiation,” and that innovation has a “distinct role to play.”

An Amcor study in Europe, covered by Food Navigator in its “Private label products growing in popularity due to price, quality, and sustainability” report, revealed that 70% of consumers regularly buy private label foods, and 50% plan to continue because they are happy with product quality. Shoppers were also satisfied with product taste, and 40% said “cleaner ingredients” were a purchase motivator.

Interestingly, 42% of the Amcor study respondents were buying private labels because of “local production,” which they perceived as more sustainable. The study also found that 34% of shoppers believed private label products were making progress in “food waste reduction,” “less excessive packaging,” and “more sustainable packaging.” Additionally, 28% of the respondents clearly stated that the sustainability of packaging was their reason for buying private labels.

Madalina Mitru, Strategic Marketing and Value Chain Manager for Amcor, says they see a “growing shift” to “eco-conscious shopping” for private label products. However, around a third of the surveyed consumers felt manufacturers needed to make more effort to reduce packaging and incorporate sustainable packaging.

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Private label products have become a trend for consumers and retailers.

Taking Private Label Manufacture a Step Further

The Amcor research demonstrates that private label growth is partly due to perceived sustainability and packaging concerns. Sustainability as a driver for consumers to purchase private label products underscores an opportunity for retailers.

Private label brands can attract consumers with lower prices, simpler ingredients, and sustainable packaging. By introducing private label products produced locally, retailers could also leverage a trend that is currently only partly influenced by sustainability.

After all, according to Agriculture and Agri-Food Canada, “price is the main barrier to purchasing sustainable food.” Per its report, 51% of consumers say sustainable products are “too expensive.”

Retailers may be able to increase their sustainability, offer sustainable products, and meet a market opportunity with well-priced own-brand alternatives.

But how can private label products be produced cost-effectively, locally, when brands currently produce in bulk, in centralized manufacturing operations, and ship out to stores?

Surely, the only option for retailers to supply locally produced goods is to stock local brands or local pre-packaged and processed farm produce?

It’s not. The answer is Relocalize.

Relocalize aims to make food supply local for affordability and sustainability. Our autonomous food and beverage micro-factories are completely scalable and can be deployed locally at retailer’s distribution centers. Entirely autonomous, produce on-demand, reduce waste, and cut CO2 emissions and costs by eliminating middle-mile transportation.

Retailer can meet private label demand and benefit from offering a truly innovative, sustainable, and affordable private label product processed locally while maintaining control over its supply chain.

Consumers get to make a local eco-friendly choice without breaking their budgets. Centralized food production was the only affordable solution…until now. Let's get in touch today!

What is Private Label food? Why has it Become a Trend?

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