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Why Private Label Might Be A Great Business Decision

Today’s food marketplace is exceptionally busy. The average full grocery store has nearly 40,000 SKUs i.e. products that it offers to consumers. Many food brands are starting to sell through online channels like Amazon or their own online store, sometimes bypassing traditional retail channels altogether. As a result, consumers have more choices than ever about what food they buy and where they buy it. But, it is becoming more difficult and expensive for new food brands to build meaningful relationships with them as the marketplace becomes more saturated.

This market saturation has led every actor in the food business ecosystem to try to capture as much of the value of the consumer relationship as possible, and this includes the marketplace where most consumers get their food: the grocery store. Grocery stores often know what products are trending up or down before the food brands’ management and already have developed deep relationships with their consumers.

This has led grocery stores to introduce their own branded products alongside others that they bring in on their shelves, often referred to as “private label” products. For example, Whole Foods’s private label brand is the 365® Every Value brand and is present in a number of categories in Whole Foods. Private label products are often priced competitively and reflect the grocery store’s detailed knowledge of their target consumer. While private label products’ market share has held steady at about 18% in recent years, private label brands are now growing faster than traditional manufactured food brands.

Matt D’Amour talks on our podcast about how Tribe 9, while it has a strong portfolio of its own brands, leverages its in-house manufacturing capability to co-pack for other businesses, whether for other food brands or for grocery stores that want to produce private label products. One of the most important business model reasons for a manufacturing company like Tribe 9 to pursue producing private label products for stores is to maximize capacity utilization of their factory. Factories make money when they are full and lose money when they are not, and most of the time it takes too long for the sales of one brand to fill up the whole factory. In addition, Tribe 9’s production of other businesses’ products allows them to respond to today’s marketplace to reach the consumer in a variety of ways without having to do the work of brand building all of the time.

Relationships with customers are key to food business growth and survival and building a brand is a great way to build a relationship. However, if food companies have manufacturing capabilities, making private label products can be a valuable part of their business model as they build their customer relationships, maximize production efficiency and diversify revenue streams.


And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Food and Beverage Business Models

Business Model Insights

Raising Capital

Raising Capital

Grocery Store Shopping

CPG/National Brands

Grocery Store Produce Section

Market Trends

 Regenerative Agriculture

Farming and AgTech

Mergers and Acquisitions

Deals/M&A

Events

Industry Events

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