Why More Grocery Stores are Switching to Private Label

In the past, consumers snubbed store or private labels as being inferior to name-brand products. The lower cost led to a misconception of poorer quality. Buying store brands, or “generic,” was frowned upon, especially when served at social gatherings. As times have changed, mindsets on private labels have as well, and people now proudly choose them. Hosts no longer need to feel embarrassed when sharing their recipe secrets. Today, more consumers are purchasing store-brand items for various reasons.

Private labels aren’t synonymous with low-quality or only for “cheap people” anymore. Since the 19th century, private label products have been available as an option. In recent years, many store brands have grown into household names.

Grocery store brands have always offered a more affordable alternative to customers. Over recent years, private labels have drastically soared in popularity. Store branded products now hold approximately 19.5% of the market share in the United States.

Creating a line of private label items for your grocery or retail store has never been easier. You can forego the investment of setting up production and manufacturing facilities. Outsourcing a company streamlines the process of starting a private label brand. Grocery stores can focus on operations without worrying about implementing their product expansion.

The Pandemic Caused Companies to Adapt to Supply Chains by Switching to Private Labels

The pandemic impacted every market globally. Still seeing a rippling effect, supply chains remain strained. Grocery stores needed to adjust to new consumer behaviors and unforeseen demands. Proactive businesses, instead of reactive ones, saw increased sales and satisfaction.

Customer shopping behaviors changed during the pandemic and continue to evolve. Many buyers rely heavily on digital tools, like apps and websites. Grocery store experiences have changed with more delivery and pickup options. The pandemic has altered buying behaviors and attitudes. Consumers seek convenience, which remains a driving business factor.

Now declared an endemic, grocery stores continue to feel the lingering effects. Adapting to supply chain issues and a changing market landscape is critical. All stakeholders still feel the ramifications of the pandemic and must remain versatile.

Grocery stores are still adapting and developing new strategies to meet consumers’ needs. Many honed in on their own branded products to address the supply and demand issues.

All of the above factors elevated the position of the private label.

The Importance of Private Label for Retail and Grocery Stores

Offering a private label is essential and beneficial for your retail or grocery store, but manufacturing your own goods can be costly. By outsourcing production, you actually have more control to grow your brand. You can design a private label that complements your business model and customer needs. 

Cost-effectiveness is a primary benefit that increases profits due to overall lower costs. By outsourcing private label production, you save money on manufacturing. Your company does not have to incur additional labor, energy, or property expenses.

Another important factor is that you control what items your grocery store carries. You can set the prices and define the level of quality, even being able to select the ingredients. With more control, you can keep up or stay ahead with market trends to best accommodate customers. For example, you can request sustainable packaging or vegan or gluten-free options.

Private labels build customer loyalty, enhancing your store’s brand and image. The average consumer wants high-quality products at affordable prices. Many consumers are aware of major retailers’ brand names. For example, Walmart defines its mission statement through its private label, “Great Value.” The grocery chain, ALDI, has bolstered its store brands through customer loyalty. Satisfied buyers inform others about high-quality private labels, which grow the business.

Predictions for Private Labels

All forecasts show continued growth when assessing predictions for private labels. Trace One, a company specializing in retail supply chains, stated that the U.S. had 23% of private labels in 2021. Trace One predicts that number to rise to 30% rapidly. A new report from Deloitte shows that private labels deliver 25-30% higher profit margins than name brands.

Consumers’ buying behaviors will continue to shift, and inflation and supply chain stressors will play a role in customers deciding to purchase a store brand. Their preferred item may be out of stock, and they opt for the private label product. But one consumer behavior that will never change is the desire to save money, and inflation rates may make it difficult for some to purchase a name brand.

As more consumers reach for private labels on the shelves, projections indicate expansion. Grocery stores will devote more space to carrying their own branded products. If a product with a private label has acceptable quality, repurchases are likely.

How to Start Your Own Private Label

Now is the ideal time to consider starting your own private label brand to offer to customers. Your company needs to develop a strategy and conduct extensive research. The decision-making process needs to be thorough and concise. Assessing different business aspects will guide your path when selecting private label products.

Conducting detailed market research includes customer surveys, focus groups, and studying analytics. These assessments will provide insight into brand awareness and your target consumer. You need to look at category performance and identify opportunities when choosing products.

Customers want affordable private labels with the same quality as name brands. Your business needs to look at the costs, value, and profit margins of products. You need to analyze the competition and market when developing selling strategies.

Once you figure out what your customer wants, you then have another decision to make. You need to determine if your grocery store wants to carry one private label brand or multiple ones. Target, for example, offers nearly 50 private label brands. This decision depends on your business strategy and the number of stores.

Deciding Between One or More Brands

Unlike Target’s ambition, many retailers only feature one private label brand. Club stores like Costco offer Kirkland Signature and Sam’s Club, Member’s Mark. Trader Joe’s has carried only one private label since 1972. Most stores implement a “three-pronged attack” to deliver the best results.

This approach is when retail and grocery stores offer three private label brands. For example, Walmart uses this model with food and beverages. Sam’s Choice, Great Value, and a newer line, Marketside, are their three primary private labels. Amazon followed this attack, offering Basics, Happy Belly, and Solimo. After purchasing Whole Foods, the mega-company continues expanding its store brands.

The three-pronged approach offers benefits and sends consistent messaging to customers. Customer awareness creates a willingness to pay more for the premium store brand. Only offering one brand may communicate a lack of concern regarding quality. Product selections with multiple private labels can indicate different categories. You may designate one store brand for organic or natural products. You can assign another private label to beverages and a third for food.

Saving on Self-Manufacturing Costs

As mentioned previously, manufacturing your own private label products can be costly. Not only will your company have to invest money, but also time. You also face uncertainty and the risk that your grocery store brand may not be successful.

Designing and selecting the perfect products for your store is an involved process. You need to hire a staff, account for operating expenses, and find suitable real estate.

Fortunately, you have options where you can outsource private label production. Finding a company to manufacture your store’s products is a much better option.

What Makes Steven Charles the Perfect Private Label to Work With?

Steven Charles has been designing private labels for businesses for over 25 years. Many companies in the retail industry trust our premiere dessert company. We craft delicious, sweet offerings your customers will learn to know and love. Our culinary experts pay careful attention to detail and only use high-quality ingredients. Private label dessert options created by Steven Charles will be your best-kept secret.

The main ingredient we pay close attention to is your store’s success. Our experts will work with you to deliver a culinary experience like no other for your customers. Steven Charles has a dedicated team to help you develop the best solution to meet all your needs. Our devoted chefs can create desserts you envision to complement your brand. Through every step of the way, we are here to support you on the private label journey.

Our proficient pastry chefs can bake large quantities of the most premium desserts. You can offer our delicious options as your own in your retail or grocery store.

There’s a reason why some of the largest operations choose Steven Charles – A Dessert Company. We are culinary innovators who design and craft gourmet creations for businesses. Our dessert company operates our facilities with an efficient supply chain process. Whatever your restaurant, grocery, or retail store needs, Steven Charles can support you.

Work With Our Dessert Experts

The dramatic growth of private labels that will continue to surge may make you want a piece of the pie. Giving your customers high-quality dessert choices establishes loyalty and boosts business. Outsourcing operations to manufacture private label products is a cost-effective and common practice. Now more than ever is the time to start or redesign your store brands. 

We want you to succeed with a first-rate private label and exceptional desserts. Step into the sweetest world with Steven Charles alongside you. Get in touch to work with our dessert experts today!