Changes in consumer attitudes within the food and beverage market have reignited the power struggle between private-label products and their branded counterparts
Private-Label Positioning in the Food and Beverage Market
As the world begins to recover from the COVID-19 pandemic, it is evident that trends in the market are still evolving, especially as they react to changes in consumer attitudes and behaviors. One decision that consumers consistently are met with is whether to purchase private label (also referred to as “store brand”) products or brand name offerings. Specifically in the food and beverage market, private-label products have gained serious traction, but are starting to reach limitations in terms of growth. Pre-pandemic private-label growth had an estimated CAGR of 6% through 2024. Now coming out of the pandemic, the estimated CAGR has decreased to 4%.
For the first time in almost a decade, the growth rates of branded goods have exceeded those of private-label products in almost every food and beverage category. According to recent data from Nielsen, private-label growth is tracking at 7.7% growth, compared to 11.1% in branded products. Despite the precedent of private brands stealing share in many niche segments, these findings show that their work is far from over. So what factors are impacting the growth of private-label brands?
Key Growth Drivers in the Private-Label Food and Beverage Market
Within the greater food and beverage market, a few key trends have emerged as society begins to transition out of the COVID-19 pandemic. Consumer health, both physical and mental, have garnered serious attention, and are reflected in the products that the market offers. Many contain antioxidants, vitamins, minerals, or electrolytes that boost holistic health and immune support. However, even with the upward trend of these health-conscious behaviors, the trials of the pandemic additionally have swayed consumers toward products that are comforting, fulfilling, familiar, and delicious. This tension between comfort and health is likely responsible for the fluctuating growth rates of private-label and branded products. Private-label brands tend to perform better in niche markets like health products, but the larger brands are more established in segments that consumers are familiar with (i.e., snack foods, soft drinks).
These pandemic-induced factors are not the only drivers affecting the private-label sector of the food and beverage market. Over the past decade, private brands have kept pace with the millennial generation’s purchase patterns. Millennials (and younger generations) tend to buy and support products that align with their belief systems, especially ones that promote sustainability and wellness. For many consumers in today’s food and beverage market, the personality of the product is an extension of their own personality or identity, and it is important that their purchase power reflects that.
Many private retailers are using these attitudes to their respective advantages, realizing that high-quality products can exist (and be sold) without the cost of a brand name. Amazon, Aldi, Costco, Dollar General, and Trader Joe’s are just a few key players who have established themselves—and more importantly, their private-label products—as staples in the lives of their customers.
The Future of Private Label
These trends align with Martec’s research in the food and beverage market at large. Although the private-label sector has seen significant growth over the past decade, providers must remain diligent in analyzing how these trends may change, just as they have during the coronavirus pandemic. In these markets, availability, quality, and social purpose are often the difference makers to consumers. To keep buyers feeling confident, producers and suppliers must focus on improving quality and transparency for today’s generation of consumers.
