Private Labels Continue to Challenge Name Brands

How Brands Can Push Back

Private labels have seen a lot of growth in the past decade. The companies which traditionally depended on their brand name to sell their product are now facing competition from other brands that are not as well-known.

Private labels have been able to create a name for themselves by focusing on niche markets and running promotions which helps them undercut their competitors.

So, how can your brand succeed amongst the ever-growing competition from private labels? Well, it starts with understanding the market. In this article, we’ll discuss the rise of private labels in the FMCG market, look into why private labels are so successful (especially in the current climate), and finally, offer some suggestions for how brands can push back against private-label competitors.

A look at the rise of private labels in the FMCG market

Private labels are a strategy in which a company manufactures a product with its own name or trademark. In the past, private label products were not as popular because they were seen as lower quality and less desirable—but times have changed. 

In today’s retail landscape, consumers are seeking a blend of quality, convenience, and value—something today’s private label brands can offer. While some consumers still seek out the reliability, familiarity, and social value (brand equity) of name brand products, the gap is increasing.

Discount supermarket chain Aldi offers a shining example of the growing private label industry. Since 2009 discount supermarkets including ALDI have grown significantly, collectively owning a 23% market share in Europe, while in the UK ALDI has grown from a 2% market share to 7.5%. 

These numbers hold true despite the sales growth of national brands outpacing that of private labels in 2020 off the back of more sophisticated online offerings. 

The consumer shift 

There are many reasons why private labels have been on the rise in recent years. Globalisation has contributed to a major shift in consumer tastes and preferences for international brands. This has led to a decrease in customer loyalty and an increase in price-consciousness among customers.

In 2020 and 2021 especially, the pandemic pushed consumers to change their shopping behaviours, thanks to availability issues, job losses, and a lack of disposable income, among other reasons.

Private labels and discounters have recognised this change and updated their products to suit. For example, private labels are now pushing healthier products and foods for people with dietary needs, such as vegan and gluten-free choices.

So, as a purveyor of branded goods, how can you stay on top of the market? How can you keep up with the ever-growing competition presented by private label products?

How brands can push back against private-label competitors

As private labels become increasingly popular in the FMCG market, some brands are taking this shift in stride and are gaining market share by innovating their goods to better suit consumers. Other brands are finding it difficult to compete with private-label products, resulting in a shift away from the name brand industry.

To stay ahead of the game, brands need to find opportunities to offer something different. For example, today’s consumers are interested in preparing and enjoying home-cooked meals, but may not have the time to do so. Brands, then, can give themselves an edge over private-label competitors by creating meal kits with pre-measured portions.

Image source: Digital Trends Media Group

Essentially, to push back against private-label competitors, marketers should be able to offer their own unique blend of customer service and quality while maintaining high-quality standards. They can also create niche marketing strategies to target interested consumers and keep their brands on the map.

Promotions and smart marketing

Promotions and marketing campaigns can work to increase awareness of a brand and boost its image. Examples of how brands can push back against private-label competitors include:

• Brand awareness: Promoting an exclusive product or service with a branded campaign to create more brand awareness and demand for the product.
• Product innovation: Replacing available products with an exclusive new product, which will drive demand for the new product and help strengthen your brand's image by comparison.
• Branding: Adding innovative features or labelling products as “exclusive” or “premium” with a branded marketing campaign to increase customer interest in your products and communicate quality.

A popular example of effective brand marketing in the FMCG sphere - more and more brands have run exciting promotions to keep buyers interested and gain invaluable word-of-mouth advertising over the past decade.

You might have seen competitions on the back of breakfast cereals or the popular Monopoly-style giveaways run by fast-food chains around Australia and the globe. 

Image source: Nationwide News Pty Ltd

Many brands also run exclusive and exciting competitions giving consumers the opportunity to win extravagant prizes — like holidays and new cars — along with smaller winnings like gift cards and product discounts. iGo Direct Group is an example of a company specialising in these promotional strategies.

The main focus of FMCG brand marketing is on creating an emotional bond between the shoppers and the brand. Marketing with promotions and gift cards can help in this process by providing a positive experience to customers.

Remember — one of the key differences between private labels and name brands is brand spending. While brands are able to invest in promotions, giveaways, and other highly effective marketing strategies, private label brands do not have this ability. That’s why marketing is one of the most effective ways brands can gain an edge over private-label competitors.

Some effective marketing strategies brands are now using include:

• Eftpos Gift Card giveaways
• Digital gift cards and rewards (perfect for the growing digital landscape)
• Loyalty cards
• Vouchers and event tickets
• Customer or bespoke offers

A quick summary

To stay competitive in the market, companies have to focus on their value proposition and brand promise. The best way to showcase these is through marketing activities, like promotions and giveaways, and focusing on creating strong brand awareness.

For brands that want to develop a long-term relationship with their customers, they should consider using promotions and gift cards as a way of generating loyalty. These activities allow brand ambassadors to take brand messaging offline and convert the customer into a loyalist. Contact the experts at iGo to know how the team can help increase engagement and sales long-term.