Food manufacturers, retailers double down on private-label, as market continues growth, FMI report

11-Oct-2024 - Last updated on 11-Oct-2024 at 13:31 GMT

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Retailers and food manufacturers are banding together to develop more on-trend and innovative private-label products, as the market sheds the perception that they are just cheaper alternatives to national brands, FMI – The Food Industry Association shared in a recent survey of 42 industry executives.

“As we look at how private brands are evolving to offer more distinctive products, it is also essential to consider the strategies that will strengthen the partnerships behind these innovations, a critical part of sustaining growth lies in how we collaborate with suppliers and enhance our supply and assortment strategies. The private brand's industry highlights the need for stronger [and] longer-term commitments with suppliers, closer collaboration, and giving suppliers more room to innovate tells you how far the industry has gone. It has moved away from transactional relationships always focused on cost,” Doug Baker, VP of industry relations for FMI, shared during a media briefing on the report.

Private-label manufacturers find opportunity in premium, frozen, better-for-you

Over the last several years, the private-label market grew to prominence as consumers traded down because of high food inflation and behaviors that came out of the COVID pandemic, FMI reported. The private-label market accounts for 25.8% of unit and 20.9% of dollar market share of the total food and beverage, for the 52 weeks ending June 30, according to Circana MULO data.

Given the growth, most food retailers and manufacturers (93%) plan to make moderate or significant increases in private brand investments over the next two years, according to FMI.

However, many retailers are still developing a key point of differentiation for their shoppers, FMI noted. When asked how far along they were in making their private brands a key point of differentiation, 36% of respondents were well along, 43% were at the midway point, and 21% were in the early stages.

Similarly, private label innovation has ticked up this year. Almost a quarter (21%) of respondents said that the private-label sector was far along with innovation, up from 10% who said the same thing last year.

Private-label manufacturers find opportunity in premium, frozen, better-for-you

Also, retailers and manufacturers see potential in a range of private-label products, including premium, best-value and frozen-food products, with 66%, 63% and 48% of respondents, respectively, saying the segment was a major opportunity. Health and well-being and products developed with "simple clean ingredients" were of interest as well, with 55% and 50% of respondents, respectively, saying they saw major opportunities in these areas.

Lower on the list of priorities, 38% of food retailers and manufacturers said e-commerce and digital private-label offerings were a major opportunity, the lowest across the survey segments. However, 9.6% of private brand sales happened online, and dollar sales grew 5.8% growth in 2023.

Additionally, e-commerce and loyalty apps “are extremely important, especially for the younger cohorts,” as they provide retailers and private-label brands with ways to connect with consumers outside of the grocery store, Baker explained.