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Private Labels Go Mainstream — And Upscale

Thu, 06/14/2012 - 10:46am
Peter Chalmers, Product Manager, Primera Technology, Inc.

Driven partly by the economic downturn and by retailers’ savvy marketing and customer loyalty strategies, private label products are claiming a greater share of store shelves and consumer cupboards. In 2000, only 18 percent of U.S. households used private label products. In 2011, private label goods were found in 27 percent of homes.

This rapid growth was caused primarily by two factors: Retail chains began focusing on the development of their own unique private labels in an effort to cultivate brand loyalty. Another factor driving the increase in private label share is price. Generally, private label goods are less expensive to produce because there is no large marketing and advertising budget attached to the product. Producers enjoy higher profit margins and consumers benefit from lower prices.

Growth in regional and chain-specific private label products

Traditionally, economic doldrums drive budget-conscious consumers toward private label products on price alone. However, the latest uptick in private label use appears to be motivated by factors other than just price. There is a definite trend among consumers to focus on regional products, many of which are private label goods.

For example, in the Midwest, a fair-trade coffee roaster provides private label products to hundreds of stores. Retail chain-specific spice and sauce blends are another private label success story, including steakhouse spices that are produced by third parties on a private label basis and sold under the steakhouse name. Other top private label products include wine, bottled water, household chemicals, pet food and bakery items.

Effective labeling allows private labels to compete

Advances in in-house label production capabilities have also played a role in many food manufacturers’ private label success stories. In the past, food manufacturers who wanted to make distinctive private labels that could compete aesthetically with those on brand-name products had to invest in expensive digital printing that was impractical from a cost perspective.

Since many private label food products are produced with seasonal ingredients and are required to provide date stamps, food manufacturers were also hampered by quantity concerns if they wanted to use offsite printers to produce high-quality labels. Smaller runs were often too costly to produce at a professional printing house, and in-house printing resources sometimes lacked the capacity to produce quality labels that could compete head-to-head with top brands.

However, advances in printing technology have opened up new options that many food manufacturers are using to their advantage. New printing and finishing systems now enable manufacturers to produce labels with amazingly sharp print resolution, vivid colors and high-quality graphics. This means they can save thousands of dollars by producing quality labels in-house rather than paying for digital press runs. It also means they can produce quantities that fit their needs and make changes to ingredients, date stamps and barcodes on the fly.

Bright future for private label products

Private label products, already found in more than a quarter of U.S. households, may continue to claim a greater share of store shelves for several reasons. With consumers increasingly focused on regional products, food manufacturers can meet the new demand by producing private label goods with hometown cachet. With retailers focused on generating customer loyalty, food manufacturers can assist by producing high-quality store brands that keep customers coming back for more.

And with price remaining a major concern, food manufacturers can hold the line on expenses by producing private label goods that don’t build large marketing and advertising budgets into the price tag. With new printing technology that allows manufacturers to produce high-quality labels that are as sharp and visually appealing as anything else on the shelves, private label manufacturers can compete directly with brand-name products — and win.

Peter Chalmers is Product Manager at Primera Technology, Inc., the world's leading developer and manufacturer of specialty printing equipment. Primera Technology serves a variety of clients, including leading food manufacturers, worldwide.

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