Private Label: An Innovative Option

Private label is on the rise, and perception has changed. Today, consumers are embracing a cost-effective option, so long as it does not sacrifice quality.

private label

We know that all consumers are being impacted by economic pressures right now, and we’re sensitive to that.” —Jasen Urena, NestFresh

The embrace of private label continues. Perceptions of private label have shifted since the COVID-19 pandemic, and store brands are now more accepted among consumers. Consider the numbers: In 2021, private label sales increased by $1.9 billion in volume over the previous year, according to the Private Label Manufacturers Association (PLMA).

4 Ways Private Label is Evolving & Advancing

  1. Shifted Consumer Perception

“The perception today on private label is very different than it was years ago,” says Steve Kravitz, CEO, Matrix Health Products, Inc. “Way back when, private label simply meant adding your store name and logo to stocked letter vitamins. Consumers are more sophisticated now, and part of that is looking for unique items from a store or e-commerce site they trust. Consumers are looking to solve issues and not just take a single vitamin or mineral. They go online and type ‘natural sleep product’ or ‘anti-aging.’ They look for one they like, and if it is offered from a trusted source, they are more likely to add it to the cart. Matrix Health has always specialized in ‘Condition Specific’ products like that. We have worked with multi-level, direct marketers, e-commerce companies and retailers of all types over our 30-plus years.”

Mitchell Coven, CEO of Vitality Works, agrees. “The days of private label perception as the average or low-priced option is over.” Indeed, he adds, “Private label will continue to outpace brand in general. Over time, consumers are less brand loyal. This is especially the case as many successful national brands with iconic founders retire and sell to investment firms, thus diluting the specialness of that company.”

That said, great care must be taken to ensure quality products. “Retailers must become as educated on the private label manufacturer’s quality, sustainability, ethics, regulatory compliance and formulating expertise as they are with their favorite brands,” Coven says. “Staff must know all this so that they can confidently bring customers to the brand and educate them on their own brand. To get this education, the private label supplier must educate and have a program to tell the truth. Every brand will say they make the best stuff, but look behind the curtain and find out the reality of what the marketing folks say.”

When private label is at its best, says Jason Minear, Vice President of Sales, Health Plus Inc., it puts a quality product into the consumer’s hands at a competitive price point. “With the changing landscape of competitive e-commerce retails, this becomes more important to keep customers within those four walls. However, there is always a delicate balance between the mix of third-party and private label within the set because you still need the third-marketing and the innovation pipeline to drive sales. I think retailers have done a good job over the last decade of making sure that products meet all regulatory guidelines that end up on the shelf, thus making private label offerings more readily acceptable.”

2.Cost-Effective Quality

Cost-effective products are a focus of consumers, but they don’t want to sacrifice quality. “As the selection of private label offerings increase in both quality and variety, the space is rapidly growing with consumers viewing these products as cost-effective, no-sacrifice alternatives to name-brand options,” says Gael Orr, Director of Marketing, Once Again Nut Butter. “I think private label products will only continue on this trajectory, becoming more popular among mainstream and health-conscious consumers.”

Value is driving sales in grocery. Jasen Urena, VP at NestFresh, says, “As we see it, the main driver of growth within private label food retail is the desire for good value. As inflation and other pressures affect shoppers, they’re looking for ways to feed their families affordably while prices rise at the grocery store in addition to other expenses. At the same time, consumers today want to see more transparency. They have good access to cutting-edge research and are motivated to learn about the foods they eat, so this definitely affects their choices as well.”

Adjusting to consumer’s price points is important. Urena continues, “We see private label growth continuing to be robust over the next few years. Without a doubt, inflation and the myriad other pressures consumers are grappling with have affected the way they shop. By working with retailers to identify ways we can both mutually benefit while continuing to delight the consumers who purchase our egg products, we’re doing everything we can to adjust to the needs of shoppers today and beyond. We’ve also invested in some key equipment and other processing upgrades at several of our facilities. From installing state-of-the-art processing machinery to improving plant automations, these efficiencies will help us meet the growing demand we see on the horizon. As our capabilities improve and expand, we’re excited to be able to offer the resulting cost savings to our customers across the board. We know that all consumers are being impacted by economic pressures right now, and we’re sensitive to that.”

Another key point to keep in mind, according to Coven: “Retailers need to continue to drive relevance for consumers to come to their store or site. Obviously, national brands can be shopped on anyone’s phone where a consumer can probably find the national brand online and on sale for a lower price point with free shipping. Couple clicks and it appears in two hours to two days. But when one runs out of their local brand or local store version of ashwagandha, D3, or formulation that worked for them, well, they will come back for more to that location as there is nowhere else to get it. We commonly see that the private label lines we partner with for retailers become top selling in that category.”

3.Trustworthiness

“Consumers are becoming much more knowledgeable about supplement quality and are educating themselves on what matters,” says Melinda Elmadjian, Business Leader Contract Manufacturing, DaVinci Laboratories. “Buyers realize that many of the brands they’re used to seeing on grocery store shelves aren’t going to get them the results they need. Whether they recognize a brand is private label or not, the demand for products that provide high-quality and research-backed ingredients is skyrocketing. Consumers want products they can trust, and often find this in a private label brand. This relationship is a win-win for healthcare practitioners and other business owners: Customers are loyal to a brand they can trust, and your business grows.”

A good partner can help you showcase quality. “There are challenges for private label regarding certifications, which are in greater demand. The cost to register each brand and label as certified organic, gluten-free, non GMO, vegan, kosher, GMP certified and so on, is costly,” Coven explains. “The private label space is and will be dominated by the companies who are large enough to provide these added value certifications.”

4. Innovation

With options online and a competitive market, innovation is important to retailers and consumers. Scott Boyson, VP of Public Relations, Trace Minerals, says, “In our years of experience with private label, we have found that retailers who come to us seeking private label products are most interested in innovative products that are good movers on the shelf and online. Because of that, we keep an eye on trends online and through trade shows within our industry like Expo West and Expo East. Retailers who are looking to private label keep a beat on what is moving, and they come to us when we have those same products that move on the shelves.”

Urena adds, “There’s a lot to be said for a good balance between offering value items to shoppers, while also continuing to delight them with fresh innovations that pique their interest. Some retailers can tend to be slow to bring new ideas to market, preferring instead to mitigate risk by doubling down on value while bumping proven branded items from their shelves to make room. This is an understandable tendency, but the concern here is that shoppers will become bored with the same-old products they’ve grown accustomed to.”

Ideally, Urena continues, “We’d like to see more retailers partner with brands that have exciting innovations ready to offer their shoppers. Without some willingness to take educated risks on what they bring into their product mix, we worry that a lot of retailers miss opportunities to build banner loyalty with their shoppers. While data is key to any retailer’s business strategy—and we’ve recently leaned into key investments in data ourselves—there’s a tendency to only bring in items that have already been proven across several cycles. While this is understandable, we’d hate to see retailers lose out on potential opportunities to grow their own brands. Shopper loyalty is so important, and one of the key ways to build that loyalty is by listening to what shoppers want. Value is key here, of course. But without bringing refreshing new innovations into their stores, retailers run the risk of alienating their customers who would like to see new offerings on shelf. This is where brands can excel, and we believe that working together is the best path forward for both retailers and manufacturers for greatest mutual success.”

Paul Licata, President, Licata Enterprises, adds, “Private label is coming closer to the cutting edge in many supplements that formerly were the purview of national brands. Many of these may not be the first product to sell a particular nutrient, but are on the innovator range. An example is our new Non-Animal source of NAC, as well as our new DHA Omega-3 derived  from sustainable algae.”

Top Trends for 2023

“Historically, private label follows suit with what is performing well in the third party brands—whether it’s an ingredient, flavor, delivery system, etc.,” Minear says. “For specialty retail, we are still seeing innovation in their brands with flavors and novel new branded ingredients. For other natural product retailers, we are seeing more introduction into commodities where retailers can provide a top seller at a value and keep the customer loyal to their destination.”

In the ever-changing trend sector, says Gene Bruno, MS, MHS, RH(AHG), VP of Scientific & Regulatory Affairs, Twinlab Consolidation Corporation, “While we often quote reports projecting sales and compound annual growth rates of a given category, the truth is that the answer to this question can change at any time. A couple of years ago CBD was the hottest trend with sales projected by some as high as the low billions—however this didn’t come to pass and the category flattened out due to a number of factors including the legal status of CBD, a glut of substandard products on the market, and too many outrageous and unsupported claims. That said, there are some trends to watch. I recently wrote an article for WholeFoods Magazine called, Dietary Supplement Categories Trending in 2023. In it I discussed category trends for bone and joint health (featuring vitaminK2 and cucumber extract), hydration (featuring multiple transportable carbohydrates), and eye health (featuring capsanthin, zeaxanthin and cryptoxanthin). The private label space can do well when including products that address burgeoning industry trends.” 

What else is gaining steam in the space?

  1. Gummies are a main focus. Bruno explains, “Despite the fact that tablets and capsules are still the lead delivery form, interest has grown in alternative delivery forms such as gummies, chews, etc. Gen Z and the Millennials are the primary drivers of this interest, although Gen X and Baby-Boomers also have some interest, especially if they are people who have difficulty in swallowing pills.”

Boyson agrees. “We’re seeing a huge influx in our functional delivery systems, especially gummies. They seem to be all the rage right now. And who can blame the consumer? Gummies are like a treat that’s also good for you. Especially when you consider that many of our gummies can be made with zero sugar. In addition, we’re getting several customers come to us because we offer low minimums, the option for a custom formula, and shorter lead times that the big manufacturers don’t offer. This is really attractive to a retailer who’s only selling products in their store or maybe in a small chain.”

Ease is key these days. “Liquid supplements are also booming,” Elmadjian says, “as they are often more bioavailable, easier to administer to specific populations like kids or the elderly, and dosages can be easily personalized.”

  1. Branded ingredients are in demand. Elmadjian says, “One significant innovation in the realm of private label supplements is trademarked ingredients. Consumers, healthcare practitioners, and business owners seek out these patented ingredients as they come with clinical research to back up their claims.”
  2. Specialty diet support is also on the rise. “We’re seeing that diet trends like keto are still holding strong in the market and our offerings are very attractive to those looking to private label,” says Boyson of Trace Minerals. “Another movement that is gaining a lot of momentum in our product offering is the ancestral movement. We recently released a TM Ancestral Line of products that includes Beef Liver and Beef Organs and we have had several retailers reach out wanting to private label.”
  3. Clean plant-based continues to win customers over. “Plant-based products made with clean ingredients are driving growth in the private label category, with items like nut butters offering consumers a cost-effective, real-food source of plant protein,” says Orr. “The lower price point of private label products also inspires trial, with shoppers being more open to trying a new-to-them variety like cashew butter, for example.”

Just Getting Started in PL? Tips for Success 

“Focusing on what is going to benefit their customer and where can private label add value should be driving that decision,” Minear says. “Retailers want private label to generate customer loyalty for a quality product at a competitive price. Private label, when coupled with innovation, can still be positioned at a premium price point and further add credibility to the private label assortment. Really having an understanding of the most common products their customer is looking for is a good place to start. But it all needs to be done in careful consideration of a healthy balance between private label and the brands that are doing the marketing and driving awareness. Also, retailers need due diligence about what their competition is doing. Lastly, retailers need to have a firm understanding of minimums (MOQs), lead times, and all the checkpoints of a quality manufacturing facility.”

5 strategies that can give you the edge:

  1. Select a partner who saves you stress. “A private label manufacturer should make onboarding easy,” says Coven, who advises looking for a partner that offers:
  • A vast list of products
  • Willingness to develop and print the labels at no charge
  • Low minimum orders (at Vitality Works, Coven says, it is 3 bottles per sku and $150 minimum order for free shipping)
  • Monthly promotions
  • Regular trainings help ensure success.

“Consumers are fiercely loyal to their local stores and favorite websites, as long as they have super product at value or competitive pricing,” Coven adds. “A private label manufacturer should educate the retailer so when they are done, the question is not why would you bring on private label, but really, why would you not bring it on?”

Orr adds, “Private label products can help drive customer loyalty, so I’d recommend that retailers partner with manufacturers that have a proven track record of producing high-quality, safe products that will inspire repeat purchases. For example, products made by Once Again Nut Butter feature clean, simple, high-quality ingredients like ethically sourced nuts. We also moved peanut butter production to a dedicated SQF Certified facility to prevent the cross contamination of allergens. This move ensures that the almond, cashew, and seed butters we provide to retailers are all processed in a separate peanut-free facility.”

  1. Focus on science. “Look for private label opportunities that focus on products with clinically relevant doses of nutraceuticals shown to be effective for the purpose intended in human studies,” Bruno advises. “In other words, products based on real science, not marketing science. If it really works, customers will continue to purchase the product from you time and again. If not, it’s a one shot only affair—not advisable if you want repeat business.”
  2. Know your customer. “It’s essential to know your customer and understand their needs,” Elmadjian says. “For example, someone in a senior living community in Florida is looking for very different products than a younger person in New England. Intimately get to know your market and choose the supplements you’ll sell accordingly. It can’t be stressed enough to partner with a private label provider that provides you with detailed product sell sheets, ingredient research, and that uses third-party testing. This knowledge and partnership allow you to become confident in the products you sell and convey that to your customers.”

In the past, Kravitz adds, some retailers offered almost every vitamin, mineral and single herb under their label while they were competing with national brands and Amazon. “Unless you are a large chain, that is a hard sell. Retailers might want to look at their current customer base and study their demographics, learn their needs and then and then pick products that address their needs and can differentiate you from the competition. There are 330 million people in the US today, and sales in natural health has interest in natural health has been consistently rising so there is room for a lot of successful retailers.”

Licata’s take: “Remember: A large portion of your sales are still in the standard A-B-C and multivitamins. Don’t overlook them in selecting products. They make consistent money for you.”

  1. Have solid, and realistic, goals. “Our best advice to retailers is to have a plan, know what you want, find a manufacturer with a focus, and keep in mind that if you’re wanting a custom formula, it takes 4-8 weeks for R&D,” Boyson says.
  2. Complement your selection of name brands. “Keep a top national brand or two in the category, but feature the private label line proudly at eye level,” Coven advises. “Never put one’s own brand on the bottom shelf, because that retailer is top notch and something to be celebrated. No retailer can afford to put average products under their name, no matter if it is bottled water, packaged food, or supplements. Private label manufactures, like Vitality Works, must produce products that are as good as or better than any national brand out there.” WF

Challenge: Increased Cost

The top challenge currently impacting all products still revolves around increased cost in both ingredients and different facets of the supply chain,” says Jason Minear of Health Plus. “Since private label typically works at sharper price points for all parties, understanding the short and long term impact is imperative to where retailers prioritize their efforts and how manufacturers can remain competitive and profitable. As a manufacturer, we are seeing more bids due to competitive pricing, and we are also seeing more bids and custom work coming from smaller retailers looking to enter the space. We are also seeing an increase for inquiries on special sizes or custom manufacturing, which all lead to points of differentiation for what is offered at retail.”

Steve Kravitz of Matrix Health Products seconds this. “The ripple effects of the pandemic are still causing issues with both supply chain dynamics and the transportation industry in terms of timelines and costs. As a company that was established in 1991, fortunately  we have very strong relationships and have been able to minimize this.”

Taking a closer look at issues impacting the space, Gene
Bruno of Twinlab Consolidation Corporation points to the difficulty of getting bottles, lids, and other packaging materials. “This issue is a supply chain issue that impacts manufacturing and costs. Lead times and availability for raw materials have also been challenging as fallout from the pandemic, as well as a function of the general economy and inflation worldwide. Another challenge (although a fun one from my perspective) is how to differentiate your brand from the competition.”