How private label is developing globally

1. Source: IGD Research
November 2017
© IGD 2017
The future of private label
How private label is developing globally

2. Source: IGD Research
Introduction
© IGD 2017 Page 2
Private label ranges are a key area in
which retailers can differentiate
themselves and stand out in an
increasingly complex and competitive
retail market. Consequently, we are
seeing a range of innovative initiatives,
through a variety of different areas of
focus.
One key consideration is what the brands
are doing to fight back against these
developments and what we can expect to
see more of in the future.
We will also consider some areas of
opportunity, where we believe there is
potential for further development and
innovation.
This report was prepared by:
Keshia Walvin
Senior Retail Analyst, International
Email: Keshia.walvin@igd.com
Twitter: @RetailAnalysis
Keshia is responsible for research in
Germany, Austria and Switzerland, as
well as covering leading retailers in the
USA. Her core responsibilities include
conducting research trips to key
markets, visiting stores and engaging
with retailers and manufacturers.

3. Source: IGD Research
Executive
summary
© IGD 2017 Page 3
With retailers developing more sophisticated private label
strategies to stand out, we have considered the development
of ranges and initiatives globally.
1
2
3
4
The four forces of change model looks at four fundamental
areas: societal shifts, transformative technology, altering
authorities, and resource resilience. Awareness of where the
growth is coming from and what is driving this is key.
We highlight the latest initiatives in private label development
through the lens of IGD’s four forces of change. These
forces are reshaping the world we live in, and specifically the
food and grocery industry.
Importantly, we also look at how brands are reacting to
these developments. Combatting the retailers’ growth in private
label will be important to the survival of brands, positioning
themselves to retain and grow loyalty.
Executive summary
5
Private label shares have been growing in many markets,
creating opportunities but also challenges for retailers and
suppliers. To stay ahead, understanding the direction of
developments is critical.

4. Source: IGD Research
IGD’s four forces
of change: STAR
gazing
© IGD 2017 Page 4
Being prepared for future eventualities is of
critical importance for any business. To
plan for the future direction of private label,
we will look at the current trends shaping
development.
This report highlights private label trends,
structured under IGD’s ‘four forces of
change’ that are reshaping the world we
live in, and specifically the food and
grocery industry.
To survive and indeed thrive, your
businesses need to know and understand
private label developments and how they
will impact your categories and brands.
This will enable retailers and suppliers alike
to assess the potential impacts and
opportunities for your businesses, and then
apply this thinking to your future plans and
strategies.
Forces shaping the future
STAR
Societal
Shifts
Altering
Authorities
Resource
Resilience
Transformative
Technology

5. Source: IGD Research
Societal shifts
© IGD 2017 Page 5
This macrotrend will manifest and
impact the food and grocery industry
in numerous ways. Here we will
focus on the significant movements
that private label developments will
shape.
These are urbanisation and
convenience, along with the
increasing demand for
personalisation of services and
products.
The world’s population is rapidly
increasing and people are living longer.
This has a significant impact on the food
and grocery industry, with a higher
demand for food.
Changing demographics are also
influencing the direction of change.
Health is becoming a larger focus, with
pressure coming from governments and
consumers alike.
Urbanisation is increasing, with lifestyles
becoming busier and demand for
convenience growing. It is also impacting
on the amount of space shoppers have to
store products.
Our industry needs to meet growing
demands from shoppers. They expect
better products, prices, personalisation,
health considerations, more product
diversity and improved services, along
with wanting meaningful experiences and
inspiration.
Retailers are using private label to
appeal to a wide range of life stages
as well as a change in shopping
habits.
Store location is critical, with many
retailers opening stores in urban,
high footfall locations. Tailoring
products to suit targeted customer
groups is another way in which
private label development is having
an impact.
STAR Societal shifts

6. Source: IGD Research
Societal shifts
© IGD 2017 Page 6
The 365 format by Whole Foods looks to
meet the increasing demand for natural
and organic foods, whilst still providing
great value. The 365 format primarily
offers products from its private label 365
brand and is being established as more
than just a store. It is a lifestyle brand
catering to the demands and
expectations of an urban, younger
generation.
As well as stores, acquiring Whole
Foods has given Amazon access to the
365 private label brand which is
predicted to become a focal point of its
online food offer. Using the highly
credible brand gives Amazon a strong
platform in the online grocery space and
sales of WFM private label products
through Amazon were estimated at
US$500,000 in the first week.
Whole Foods Market’s 365 private label
range aims to provide high quality, value
priced items. It offers a range of goods,
including on trend products, particularly
targeting the budget-conscious, tech-
savvy millennial shopper. Health and
urbanisation are two of the major themes
within societal shifts and this range aims
to address some of those core needs.
Targeting millennials 365 format by Whole Foods Direction of Amazon
STAR Societal shifts
, Whole Foods Market, Amazon
Case Study: Whole
Foods Market 365

7. Source: IGD Research
Societal shifts
How can brands fight back?
© IGD 2017 Page 7
Personalisation
Personalisation is one way in which brands are fighting back
against the growth in targeted private label ranges. With retailers
developing ranges specifically for groups of shoppers, many
brands have capitalised on the opportunity that personalisation
can bring. It takes targeting a step further and allows consumers
to create products that are especially for them, providing a USP
that private brands can not easily replicate.
Creating a unique product
Some great examples of brands who have done this successfully
include Marmite and Nutella, with their personalised jars,
particularly aimed at the gifting market. Magnum has evolved
from personalised products and now has a number of Magnum
pop-up stores globally, offering customers the chance to
personalise their products in-store. With consumer tastes and
preferences becoming more varied, personalisation taps into this
growing need for specialised, unique items.
STAR Societal shifts
, Marmite, Magnum

8. Source: IGD Research
Transformative
technology
© IGD 2017 Page 8
The areas of technological
development we will focus on are. We
will focus on how new paths to
purchase are evolving and locking in
loyalty.
These areas continue to evolve and
adapting to win will be key to standing
out amongst competitors and staying
at the front of shoppers’ minds.
Technology is altering the way shoppers
purchase and interact with products and
services.
Advances in technology will continue to
change the path to purchase with areas
such as voice ordering set to impact the
shopping process. This is an area in
which retailers need to develop a clear
strategy, in order to ensure they can
effectively promote their private label
products.
Businesses that are best able to use
technology to meet shoppers’ changing
needs will be better placed to win.
The digital revolution has no boundaries
or borders. It is changing behaviour and
expectations as much as the tools used
to deliver new services and experiences.
Voice-activated ordering is developing
as a way to purchase goods, increasing
the power of the operator to decide
which specific product to add to a
basket.
As more smart devices enter the
market, retailers and brands will look to
capitalise on the opportunities that this
offers. Being an early mover could
result in locking in customers’ loyalty,
particularly with the use of favourites
and automated repeat ordering.
STAR Transformative technology

9. Source: IGD Research
Transformative
technology
© IGD 2017 Page 9
Jet.com launched a new range of private
brand products called Uniquely J. The
offer is premium-focused and looks to
compete with Amazon. The retailer
views private brands as an opportunity to
differentiate itself and build customer
loyalty. Through Jet.com, it can also
reach out to a new, younger shopper
group who may not have historically
been its core demographic.
Walmart is introducing a number of
initiatives to lock shoppers in. Easy
reorder allows shoppers to quickly build
a basket of previously purchased
everyday essentials. It has also
partnered with Google to offer voice-
based ordering, creating opportunities to
make the path to purchase more
convenient for shoppers and lead the
way in technology.
Since its purchase of Jet.com in 2016,
Walmart has been using the technology
that the platform offers, redesigning its
core website and using it to widen its
online reach. Jet.com has partnered with
Latch, a smart access company to install
access systems in apartment buildings in
New York, increasing the convenience of
home deliveries.
Walmart and Jet.com Uniquely J Locking in loyalty
STAR Transformative technology
, Jet.com, Walmart
Case Study: Walmart

10. Source: IGD Research
Transformative
technology
How can brands fight back?
© IGD 2017 Page 10
Shopper influence through social media
Brands have increasingly been using social media channels to
engage in two-way communication with their customers.
Starbucks recently added a new drink to their menu, due to its
popularity on Instagram. The medicine ball drink was shared on
the platform, leading to a number of customers asking for it in-
store. Starbucks decided to add the drink to its menu, ensuring
that customers got a consistent drink each time it was ordered.
Interactive games
In China, Pepsi launched a huge campaign over Chinese New
Year through WeChat. One feature allowed users to send
fireworks greetings to friends and there was also a game. Due to
the high penetration of WeChat and gaming in China, the
campaign successfully spread rapidly, creating a buzz around
the brand. Despite not being directly sold through the platform,
the campaign helped to engage customers with the brand.
STAR Transformative technology
, Pepsi, Starbucks, Today.com

11. Source: IGD Research
Altering
authorities
© IGD 2017 Page 11
De-globalisation is one of the major ways
in which altering authorities has an
impact on the future of private label.
Customers are increasingly demanding
local products and are keen to know that
they are supporting local communities.
From a supply chain point of view,
unstable currencies and commodity
prices are an important influence when
considering the benefits of localising
production.
Societies’ distrust of political institutions
has been extended to the mistrust of big
businesses. This can include both
retailers and suppliers.
This has seen established institutions
come under increasing pressure to be
seen as ‘good’ businesses, and to
demonstrate care for their customers.
In the grocery market, this is often
reflected in consumers wanting more
transparency around product origins and
business practices.
Furthermore, the consequence of this
mistrust continues to resonate around the
world and mean that the years ahead are
also likely to be turbulent and hard to
predict.
With a general anti-establishment
feeling, there is a shared sense that
global systems no longer work
effectively and as intended.
Instead, the benefits are thought to be
enjoyed mainly by elite groups. This
can be used to retailers’ advantage
when they compete against big brands
with their private label products.
STAR Altering authorities

12. Source: IGD Research
Altering
authorities
© IGD 2017 Page 12
Brandless is an online grocery store
selling grocery and household items for
US$3 each, all under the Brandless
name. The idea is that customers get
added value, as they are not paying for
branding and fancy packaging and are
receiving it directly. It also offers a
number of suggested bundles, including
snack, meal and new home bundles
which aids convenience and simplicity.
With a shift towards supporting smaller
business and local communities, the rise
of ‘no brand’ products looks set to
continue. Shoppers are increasingly
looking for simplicity, with less waste
and a lower environmental cost. These
minimally-packaged, simply-designed
products appeal to these shoppers.
South Korean based Emart has opened
stores dedicated exclusively to its ‘No
Brand’ private label products. The model
is similar to a hard discount store and
aims to provide a satisfactory shopping
experience to customers whilst
maintaining the price competitiveness of
a discounter. Minimal packaging and
marketing keep costs low, with the
savings passed on to the consumer.
Emart- No brand storeBrandlessSimplicity
STAR Altering authorities
, Brandless
Case Study

13. Source: IGD Research
Altering authorities
How can brands fight back?
© IGD 2017 Page 13
Danone: ‘One Planet, One Health’
Danone launched the programme to aid the sustainability of the
earth and ensure it is contributing positively to the creation of a
better future. This shows how a big global brand can act in a way
that consumers deem to be ethical and considerate and therefore
builds trust in that brand. By using the power of its scale and
global reach, big businesses have an opportunity to make a
difference and programmes like this help showcase that
commitment to consumers.
Deglobalisation
In many areas, deglobalisation has been increasing, with
consumers looking to support local industry and communities. This
can create challenges for large, global brands but we are starting
to see an increase in brands localising their products, through local
sourcing, production and tailoring products to meet local needs.
This is more commonly seen in categories such as fashion, with
retailers like Lululemon and Uniqlo doing a great job. There are
opportunities for grocery brands to do more in this area.
STAR Altering authorities
, Danone, Lululemon

14. Source: IGD Research
Resource
resilience
© IGD 2017 Page 14
As shoppers become more
demanding they will expect industry to
meet their ever-increasing
expectations.
Industry will need to become even
better at demand planning and
resourcing to ensure products and
services are delivered.
As the global population increases and
becomes more affluent there is growing
demand for more diverse products and
services. This is resulting in increasing
resource constraints.
Companies will need to become more
efficient and resilient to help manage
costs, currency instability and potential
regulations, particularly when operating
globally.
This creates opportunities for private
label expansion, as this can help retailers
to retain control over production and
distribution.
The food and grocery industry will not
only face material resource constraints
but will find it harder to plan for demand
peaks and the rapid lead times that
shoppers are coming to expect as
standard. Less reliance on brands can
help retailers to manage this.
Currency fluctuations can have a huge
impact on international retailers,
affecting raw material prices, along with
production costs and retail prices.
Developing strong private label brands,
which act as destination brands, can
help mitigate the effects of resource
constraints and can build a platform
from which retailers directly engage
with shoppers through targeted
marketing.
STAR Resource resilience

15. Source: IGD Research
Resource
resilience
© IGD 2017 Page 15
Kroger has announced that it will launch
a fashion line, looking to reinvigorate its
clothing offer and appeal to shoppers
looking for on-trend, playful and modern
clothing. It will include men's, women's
and children's clothing as well as a
selection of active wear. The increase in
retailers developing their own stand
alone brands, resonates with the
increasing need to differentiate.
As well as being used as a point of
differentiation, we are increasingly
seeing retailers venture into selling their
private label ranges as brands to other
retailers. For example, Tesco partnered
with Fairprice in Singapore to stock its
Finest private label range. This could
happen with some destination private
label brands whereas others will choose
to retain them as unique.
Since its launch in 2016, Cat & Jack,
Target’s private label children's clothing
brand, has surpassed US$2bn in sales,
becoming one of Target’s largest ever
brands. Evolving the offer, it has
announced it is launching adaptive
clothing, made specially for kids with
disabilities, with features such as hidden
openings for abdominal access.
Cat & Jack- Target Kroger 2018 Selling to others?
STAR Resource resilience
, Target, Kroger
Case Study

16. Source: IGD Research
Resource resilience
How can brands fight back?
© IGD 2017 Page 16
Direct to consumer
One of the ways in which brands are combatting the threat of
strong private label destination brands is to sell direct to the
consumer, bypassing the reliance on a retailer. This is becoming
popular in two key areas, subscription boxes and pop-up branded
shops. Pop-up shops give brands the chance to showcase their
products and raise awareness, differentiating themselves from
others and getting direct access to consumers. This is also often
used to promote subscription boxes, for example Birchbox.
Partnering to create an online shop
Unilever and Reckitt Benckiser are planning to launch a digital
platform to sell their products directly to consumers. They predict
shoppers could save up to 30% by cutting out retailers. The
platform will enable the companies to decide their own pricing,
rather than negotiating with retailers. One watch out is around
convenience; unless shoppers are purchasing a large number of
items, adding another site to their shopping options may
increase complexity.
STAR Resource resilience
, Birchbox, Unilever

17. Source: IGD Research
Want to know more?
Need something else?
Here to help
© IGD 2017 Page 17
Access more of IGD’s Retail
Analysis Trends insights here
Fit for the future
Our ongoing global research means that we’re constantly scanning the horizon for
future trends.
By taking a macro perspective that encompasses both trends and geopolitical
situations, whilst factoring in economic possibilities, we formulate a broad view of
the future.
Once this is added to your company’s business priorities the result is a compelling,
client-relevant future scenario to enhance your planning and future strategies.
@RetailAnalysis
Follow us on Twitter
Email askIGD@IGD.com
Email Keshia.Walvin@IGD.com