The rise of own label
A Tale of two butters
We have pancakes on Sunday mornings. They’re easily the highlight of any week, although competition over the last one on the pile is fierce. I tell you, it takes all of my parental love to let my son eat the last pancake.
On this particular morning, there was what you could call, objectively, a pancake crisis.
We’d run out of butter.
Cue a groan from me. Out of respect for our local Co-op cashiers, I would have to get dressed in something other than my pj’s. Then again… pancakes. What are you going to do?
I got dressed and took on the winter morning cold. I was a man on a mission – an important mission, where failure was not an option.
Arriving at the small local store, I headed straight to the relevant aisle and shelf, muscle memory my guide, a photographic memory stamp my means of identification. Here is where the hero of this story encountered his first antagonising force.
The shelf was empty. My butter wasn’t there.
My overriding emotion was not disappointment, nor was it the deep sadness one might expect considering pancakes were at risk. I was just annoyed. I was going to have to work. Reluctantly, I would now have to engage my brain, read packaging labels, engage with new designs. On a Sunday morning.
You see, I would call myself a simple shopper. Certainly, when it comes to grocery shopping, I head for one brand when I’m looking for any particular item. Maybe two, if my purchasing history has involved such a variety, but mostly — and especially at 7am in the morning— it’s just the one.
So, if my first-choice brand is not available, anything is up for grabs. I’ve had to move beyond ‘what I always buy’ so I need to consider new criteria such as:
How far away the product is from the one I planned to buy originally.
How well I can identify it as a suitable substitute.
How much it costs.
I came, I saw, I conquered. I bought a cheap and harmless-looking own label alternative. It wasn’t the brand I wanted, but it was butter. I knew that it would do the job. After all, I was buying butter, not a new car, and my family was waiting for pancakes.
I came back with butter. It was the ‘wrong’ butter, but those pancakes tasted the same as they always did. Our family was still brand loyal … but now we knew that the own label butter was perfectly acceptable.
Am I your typical customer? Even if I’m not your typical customer, can you ignore me and what happened that fateful Sunday morning? It is an (admittedly prosaic) illustration of how a brand can lose a customer to own label alternatives.
What is an own label/private label product?
Own label products, also known as private label, are products manufactured by a third-party producer and sold under a retailer’s brand name. They give retailers more control over the product – what’s in it, the packaging, the branding, and crucially, how much it costs. They shift the balance of power between the retailer and the massive brands that provide many of their products by providing an element of competition to those brands. They also allow retailers to easily and quickly respond to changing trends, such as the rise of the eco-conscious consumer and the growing interest in meat-free and organic products.
Private labels are found in all sorts of consumer product categories, including cosmetics, personal care, household cleaners, food and beverages. Private label’s share of the wine market is now more than 40%, according to Harper’s Wine and Spirit Trade Review, with half of sales across the grocery sector now going to own label products.
They are particularly successful in products that people buy often, where there is low brand equity, and not a lot of innovation or price sensitivity – like butter. Or bread, cornflakes or shampoo. They are often positioned as value products offering a cheaper alternative to their branded counterparts, but there are premium own label products, too, such as Tesco’s Finest range.
Examples of premium own label products include wine, specialty groceries, coffee, and prepared/ready-to-cook chilled meals of restaurant quality, says a Nielsen report.
Private label products have been around for decades, but in a world where brand loyalty is on the wane, they are enjoying a resurgence. At the same time, consumers are newly empowered and informed by social media, which enables them to compare prices instantly, and they are more prepared than ever to shop around for the best deal.
Indeed, the success of discount retailers such as Aldi and Lidl shows that brands matter less to consumers than previously thought, particularly for staple goods such as my pack of butter. Rather than stock dozens of brands for any given product, what these guys do is work out what the market leader is, find someone who can make them something that’s just as good and then commit to buying it in enormous quantities to keep the price low.
Shoppers, particularly the millennial consumers who are starting to dominate the market, want the best quality at the lowest price, and if you can convince them that your own label product is as good as the market leader – or even just a good enough stand-in – then sales will soar, as Aldi and Lidl have proved.
The rise of internet shopping hasn’t helped – people buying online are even more price-conscious and less brand-loyal than in bricks and mortar stores. Although it also helps brands, the open nature of the internet creates new opportunities for retailers’ own labels to increase their sales.
Interestingly, if you study the impact of private labels in most categories, the top one or two brands are reasonably protected thanks to the strength of their brands. If anything, they do even better in a world of private label domination, but so-called B-brands, the number three, four and five products, which lack real traction with customers, are particularly vulnerable.
So how do you deal with the rise of the private label?
The key is to pick your battles – and your battleground. In many FMCG categories, brands may in future find themselves restricted to categories with high entry barriers.
Own brands have the might of a retailer’s marketing team behind them, and every own label product is boosted by the overall strength of the retailer’s brand. But most private labels are just good copies of the market-leading products – they tend to follow rather than lead. And that association with the retailer can be a double-edged sword as the individual product merges into the overall brand, rather than standing out on its own merits.
So, you need to innovate to make your product different enough to be worth buying, while also tapping into wider trends such as eco-friendly products, the move to reduce plastic in packaging and healthier foods. This is also an area where it is worth committing a significant amount of your marketing budget to make your products stand out, not just through advertising campaigns but in-store as well, through point of sale or end of aisle promotions.
At the same time, you can move the point of sale away from the retailers – in this situation, they are not your partner, but your competitor. But they can only sell their products in their stores. Increase your focus on the digital marketplace, where the playing field is more level, and you can get your product in front of your consumers if you commit the resources. And a clever campaign can build a strong organic following for your product to further differentiate it from the crowd.
Be careful, though. There are dangers in digital. Think about people shopping online using Alexa or Amazon Echo. They’re just going to say “butter”, not Lurpak. And Amazon or Google are just as likely – more likely, maybe – to recommend an own-label butter as a branded product. You need to think about how you can get around that.
The digital revolution also increases the opportunities for enhanced personalisation, in shopping as in other areas of life. In the age of the Fitbit and the Apple Watch we track everything. Retailers can take that information and create personalised nutrition or personal care shopping lists. How do you ensure that your brand is on that list?
Maybe it’s time to think completely outside the box. Maybe the antidote to your fast-paced loss of shelf space is wrapped up (see what I did there?) in the title itself.
Change the way you think about private labels. It’s not the big retailer that owns a private label. You do. Theirs is anything but private. It has a big marketing engine behind it, all the shelf space a bar of soap could dream of, it’s out front for every store customer to see it.
Yours is the private label. Hiding in the corner where no-one can see it. Beautifully designed packaging that no-one can see. Very private. Niche. Exclusive.
And own Label: There’s a clue here too. Just as the store’s brand is unapologetically their own, brands should decide what it means to be in control and have ownership of their individual brand. Not just how your product is to be physically labelled, but just as importantly, how consumers will label your product.
Remember branding is the picture you’ve painted in the mind of the consumer when they think of your brand. Decide how you want to be labelled – and own it.
Just as in life, it comes down to relationships. How ‘faithful’ are your customers when it comes to your brand? Will they ‘cheat’ on you at the first sign of inconvenience?
Like I said, those pancakes tasted great regardless of my ‘infidelity’!
Anton Vann
Director, Creative Coup
Creative Coup is a branding and design agency, creating show-stopping moments for our clients and their customers. Specialising in the FMCG market, we deliver print and digital design support to brands that want to stay relevant in a fast-changing digital world.
