The latest report from Alvarez & Marsal's Consumer and Retail Group (A&M CRG) underscores the significant growth and market influence of private brand retailers. According to the report, private label spending in the U.S. currently accounts for 20% of the total market and is projected to rise to 24% by 2030. This surge is noteworthy given the overall slower growth of the grocery market.
Highlighting the financial success of private brand retailers, the report notes that the top four private brand retailers have experienced a remarkable 144% growth in stock prices over the past five years. Furthermore, these retailers have opened over 250 new stores in the past year alone, indicating robust expansion and consumer acceptance.
Marco Valentini, Managing Director at A&M CRG, emphasizes the correlation between successful private brand grocers and their market share and financial performance. Valentini points out that the top players differentiate themselves through strong executive commitment to their own brands, prioritization by chief merchants, and targeted marketing efforts. This approach not only elevates product awareness but also fosters customer loyalty and advocacy.
The report, titled Accelerate your Private Brand journey to win with customers and shareholders, outlines several key enablers and benefits for retailers focusing on private brands. Key factors include value perception, with private brand products being 30 to 50% less expensive than national brands while matching or exceeding quality. Product innovation is another critical aspect, allowing private brands to tailor products to specific customer demographics and preferences, which drives purchase decisions based on quality and taste.
Additionally, private brand margins typically surpass those of national brands, offering better unit economics. This enables retailers to provide value through price and promotional investments without diluting margins. Brand development also plays a pivotal role, as more than eight in ten shoppers make purchase decisions based on brand trust. Effective private brands enhance the overall perception of a retailer's banner brand.
Sustainable sourcing is another advantage for private brands, allowing retailers to control product development, packaging, sourcing, and supply chain processes to meet specific sustainability goals. This is particularly important for Gen Z and Millennial shoppers who prioritize sustainability in their purchasing decisions.
John Clear, Senior Director at A&M CRG, stresses the necessity of a comprehensive private brand strategy for grocers to remain competitive. Clear advocates for a clear plan that includes differentiated brand architecture, consistent positioning, and scalable innovation processes to ensure repeatable success.
For more insights and to download the full report, visit the Alvarez & Marsal CRG website.
