What is the best way to use private label brands to boost business revenue? Our guide outlines the strategies to successfully use private label items.
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Private label brands — often called ‘own brands’ — have conquered our supermarkets, discounters, drugstores and etc. And have long been an indispensable part of global retail. But how will this trend develop in the coming years? And what do manufacturers of private labels have to think about now in order to be successful with their business model in the long term?
Keep an eye on the trends
Almost every second item that is sold in hypermarkets and discounters today has a private label as the supplier. And the proportion continues to rise. The manufacturers in this industry cannot avoid dealing with the changes. The private label business will develop even more in the next few years, meeting the requirements the large retailers place on the suppliers of their own brands and how manufacturers deal with these challenges.
How to calculate start-up revenue
The field is divided into three groups: The majority of manufacturers operate both with their own brands and with private labels (so-called hybrid companies). There are also a large number of specialists who either only deal with their brands or only with the retailer’s own brands. As the company’s balance sheet data show, private label manufacturers are growing faster on average than pure brand specialists. In terms of profitability, however, the brand manufacturers have a clear lead.
Boost revenue with private label brands
If you take a closer look at the group of retail brands Pure-Player, for example, you will discover huge differences in terms of growth dynamics and profitability of the providers. A more detailed analysis quickly shows: the business model makes the difference!
Those who only play along with standard items in the private label business and in order to utilize their production capacities will only achieve modest values in terms of growth and earnings. Interchangeable items in the entry-level price range are usually not particularly fun for either the suppliers or the retailers.
At the other end of the scale, however, there are also manufacturers with a highly developed business model who conduct business with their own brands according to the same rules and with the same professionalism as branded companies. You earn better than the industry average and achieve sustainable growth rates of over 8 percent! There is a lot to be learned from these private label professionals.
Private labels brands can disrupt
The private label business has become smaller and faster in recent years, and this complexity will only increase. The retailers are struggling to adapt their product ranges as best as possible to the regional needs of their customers and to keep them attractive through variants and frequent rotation.
On top of that come current trend topics such as the reduction of sugar / fat / salt, the sustainability of the packaging concepts or the use of GMO-free ingredients in the food insdusty, for example. The result for the manufacturer: packaging requirements are falling, the batches are getting smaller and the effort for sorting and special solutions is increasing.
On the other hand, retailers are increasingly demanding innovative product concepts from their suppliers – preferably things that the competition does not yet have and with which individual retailers can distinguish themselves among their customers. Keeping complexity and costs under control while at the same time launching innovative solutions – that is a balancing act for private label suppliers that not everyone manages.
Benefit from additional opportunities
For most private label suppliers, the challenge is first of all: to further develop the existing business model in the direction of advice and services without jeopardizing cost efficiency and speed. In addition, the changes in retailer requirements have also opened up new, innovative business models for private label manufacturers.
For example, the “flexible small-volume specialist” has specialized in the “long tail” of retail brands and quickly and flexibly delivers small production quantities or niche products that are not economically feasible with the design of larger suppliers.
Even the “multi-optional problem solver” would not have been conceivable in this form a few years ago. He organizes complete problem solutions in individual product segments for trading partners and makes use of a co-packer network in full or as far as possible.
One hundred percent private label culture and high flexibility of the multi-optional problem solver ensure tailor-made solutions for the trade and at the same time use capacities and competencies on the industrial side that would not come together without this intermediary.
