Q3 INDUSTRY UPDATE
It’s no secret that Amazon’s effect on the economy is profound. Consumers now expect products to travel from warehouse racks in the Pacific Northwest to front porches in the Southeast in less than 48 hours – for free. Additionally, they expect access to data that ensures they are paying the most competitive price for an item or service. Not all of this herculean feat can be credited to Amazon, but the behemoth is certainly symbolic, if not archetypal, of this trend.
Due to increased access to information, consumers are shifting loyalties away from specific brands to whom they have historically assigned quality, toward the specific qualities themselves. For instance, 50-60 years ago Coca-Cola was an all-American beverage with a heritage of healing the sick, refreshing the thirsty and satisfying the craving. Now, Coca-Cola is symbolic of obesity and bad diets, while LaCroix delivers bubbly refreshment to the masses without artificial sweeteners. All this to say, consumers know what they’re looking for, and they’ll prioritize “best,” “fastest” and “cheapest” based on their needs.
We think there is a clear thesis, and we, like Babe Ruth in the 1908 World Series, are calling our shot. Private label is going to grow in the U.S. Now, we aren’t really the visionaries we are making ourselves out to be, because the likes of private label grocery juggernauts Lidl and Aldi have announced massive plans for U.S. entry, Whole Foods plans to roll out “365,” and “AmazonBasics” is a top ecommerce brand in several categories, such as batteries. Private label maintains roughly 16% market share in the U.S., compared to 34% in Europe.
Private label represents an opportunity for some categories to “trim the fat.” If consumers are already seeking out a product, and they don’t need to be educated, a sophisticated brand may not be necessary, freeing up significant cost centers in the value chain. Private label brands can pass along some of this margin to the consumer, thus making the product competitive and poised to eat share…
Click Here to Read the Full Report >