The cult of Private Label has been growing and growing over the past 10 years, meeting a strong demand from consumers for lower cost, high quality goods.
A recent article on www.fmcg.ie – https://bit.ly/1naBG7M – estimates that 50% of brands on our supermarket shelves will be own brand by 2025.
For the shoppers, this represents good news in the short term at least and it’s definitely positive for the retailers, with own brand being significantly more profitable than established brands.
I am very apprehensive about the popularity of private label though. Here’s why.
1. Risk to the producer – selling product to a supermarket for their own brand is great initially for turnover but producers take a big hit on their profit margins and are expected to maintain the same quality standards as well as, on many occasions, implement additional processes that have a cost impact in terms of personnel time.
The biggest risk is that, if the supermarket is suddenly able to source the product elsewhere for less money or just decides to change supplier for any reason, the producer finds herself or himself with no relationship with the consumer and no perceived demand amongst consumers for their product, because they didn’t know who made it. Recently, some retailers have introduced the name of the actual producer on their own brand packaging, which is a great innovation.
Producers can find themselves increasing capacity exponentially and investing capital in order to meet orders but suddenly losing their supermarket customer with very little comeback.
2. Reduction of choice for the shopper – consumer choice may be vastly reduced with the influx of own brand products. I remember, a lot of years ago, when I lived in London, one of the big retailers introduced its own label of tinned tomatoes at a ridiculously low price, something like 11 pence. Naturally, they flew off the shelves. It wasn’t very long until there were only two brands available and the big boy brand price went up. There are many examples of this happening in other categories but, hey, I like tomatoes!
In terms of stimulating the economy and keeping local producers in business as well as ensuring choice for the shopper long into the future, we should all make the effort to support the producers’ brands, even if it does mean an extra couple of cent.
What do you think?