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A recession is upon us. As the COVID-19 crisis continues, shoppers are focused on getting essentials any way they can—at the lowest prices. This means that private label brands are disrupting the market and gaining new customers. It’s time to start rethinking your retail strategies as private label brands become even bigger competition. 

Private Label Is Growing Faster Than Ever

Private label brands check two of the most important boxes for shoppers right now: they’re available and affordable. They were growing quickly even before the pandemic began. According to Nielsen, private label brands saw $143 billion in sales in 2019 alone, growing nearly $14 billion since 2015. Brands like Safeway’s O Organics, Kroger’s Simple Truth, and Target’s Good & Gather have strong marketing while also having control of distribution and in-store presence, giving them an advantage.  

Now that COVID-19 has people reprioritizing their spending, private label brands could become category leaders. Private label products increased by $4.9 billion in the first quarter of 2020. Categories that are already feeling this impact include OTC remedies, ready-to-drink beverages, laundry and household cleaners, frozen foods, salad dressings, meats, personal care, soups, and snack bars.  

Shortages and Recession Are Increasing Private Label Growth

Temporary shortages in Q1 and Q2 have been forcing shoppers to buy private label. When their preferred choices are out of stock, shoppers are discovering new products. According to the 4A’s, 78% of consumers would buy any brand available for the products that they need. 

Even when national brands become more reliably back in stock, the recession will still be here, and it will take time for people to get comfortable spending normally again. While some shoppers will likely revert to their old habits, many will be tempted to switch brands for good. In fact, 25-30% said they’d continue buying private label even after the pandemic. That means the shoppers lost now could be gone for good.

Start Rethinking Your Strategy

With the acceleration in private label growth, it’s time to revisit retail strategies to consider how to defend and prosper in these recessionary times. Pricing and trade promotion will be part of that equation, but you should also consider: 

• Assortment planning: Defining the current optimal mix of national brands vs. private label brands that will grow vs. erode the category 
• Category presentation: How brands and categories are shelved, organized, and presented to shoppers to orchestrate behavior in the most profitable ways 
• Packaging: How the look and underlying format hold up against the leading private label brands that have greatly invested in packaging 
• Tiered offerings: Premium, mainstream, and yes, value entries 
• Innovation: Look no further than the dairy category, half of which is now non-dairy alternatives, to see the power of innovation at work 

Now’s the time to rethink your retail strategies, including how your brands and categories can win at top retailers. We can help. Contact Peter Cloutier at pcloutier@chasedesign.net.