Point 1: Hard discounters have championed the private label strategy
The largest discounter globally, German Aldi, has been the fastest-growing grocery chain in the U.S. The private label strategy was at the epicenter of its success. As the number of consumers looking to save money while shopping close to home continues to rise, the future looks bright for Aldi and other discounters.
Point 2: Traditional chains have a lot of catching-up work to do
Discounter chains like Aldi and Trader Joe’s have relied on the private label strategy to attract consumers to their stores. Traditional grocery chains fall far behind discounters in terms of private label penetration. As conventional grocery stores look to catch up with discounters, growth prospects of the private label continue to look promising. At the same time, national brands (especially the weaker ones) are set for a rough ride as customers and stores opt-in for private labels.
Point 3: The unstoppable rise of the private label
Historically the role of retailers was mainly limited to the distribution of nationally branded products. But with the rise of retail giants (i.e. Walmart, Amazon, Costco), national brands got a new competitor, retailers themselves. Retailers’ own labels, once used to focus on low-value goods, have been groomed into an affordable quality category. And that resonated well with the consumer. The relentless growth of Costco’s Kirkland Signature brand is the most prominent example.
Point 4: Private label is taking shelf space from national brands
With growing acceptance among consumers, retailers allocate more shelf space toward private labels. Costco proves the point again. Share of Kirkland Signature brand sales have been climbing steadily over the past decade. In fact, Costco’s growth story has become increasingly reliant on the success of the Kirkland Signature brand.
