The Rise of Private Labels in an Inflationary Crisis Environment

The post-pandemic economic opening and the high cost of living around the world have led industries to prepare strategies to face the current crisis. However, one of the solutions to these high expenses faced by consumers lies on the shelves, and these gain greater importance than ever before through private labels.

 

  • Financial instability paves the way for the success of private labels

Supermarket chains have opted to sell products under their own brand and have been successful on it, especially under budgetary constraints. The combination of low cost and good quality has made its way into households, where consumers gravitate towards products that reflect affordability.

In fact, 21% of respondents surveyed by Euromonitor in 2022(*) stated that they would invest more in this segment, considering the high quality that competes among brands.

Coffee has been one of the most successful categories for these supermarket chains; for example, in 2022, private label coffee accounted for 7% of the global macro category, while 4% of the segment corresponded to instant coffee beverages(*).

 

  • Premium Private Label: A Powerful Tool

The economic recovery has increased the consumption of premium products following the economic restrictions caused by the pandemic. The coffee category is a leader in the “premium & indulgent” product trend. In 2022, this labeling accounted for 15% of category launches(**), and in the United States, there was a 34% growth in volume compared to the previous year(***).

Access to quality products at lower prices drives higher revenues for private labels and becomes an excellent strategy for customer loyalty. Undoubtedly, the premium segment will constitute an essential share in supporting the retailer’s image.

 

  • Perspectives on Private Labels

Voice of the Consumer, Euromonitor, 2022

Retailers

  • Improve the retailers’ image and increase consumer loyalty
  • Differentiate from competitors through category selection
  • Gain new consumers
  • Greater profitability

High-Quality Private Label Categories

  • Products that offer functionality
  • Products with a low connection to identity and lifestyle
  • Products with low price elasticity
  • Categories with low sales volumes but significant growth

Consumers

  • Demand added value, exceptional quality experience and service
  • A more balanced value equation

Competitive Power

  • Significant cannibalization of standard label private brands
  • Positive impact on high-quality national brands

 

Conclusion
Private labels will continue to enter categories that allow them to maintain low costs while protecting quality to build customer loyalty and differentiate themselves within their category(*).

Including premium portfolios, retailers will continue to evolve, leaving behind the idea of being a low-cost brand that sacrifices quality, to become the trusted basket of the consumer seeking convenience.

 

Sources:

  • *Private label: Evolution of premium in food and beverages, Euromonito.
  • **Coffee category review, InnovaMarkets, Febrero 2023.
  • ***Byzzer report,2023.

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