Private Label Becomes the Branded Product
Almost everyday the Studio faces challenges that private label competitors impose upon our branded products clients. More and more private label brands are taking lessons out of the innovation and brand strategy playbooks and getting ahead of the once category-leading brand product.
Advances in product development, consumer empathy ethnographies, innovation, packaging, manufacturing, and branding—not to mention owning the point-of-sale in the retail stores—give the once me-too product knock offs about to soar above the leading consumer goods companies and, again, beat them at their own game.
Look at the redesigned Target or Walgreens or Kroger brands, for example. They have the ideal mix: right product, right price, right place, and right packaging and experience.
Private labelers have become the brand of choice, the default brand in non-commoditized categories.
Moreover, these brands are hiring global thought leaders from brand and innovation firms and creating new products that give them the competitive edge. You can call this move the offensive strategy of private labeling.
The defensive strategy still works well, too. Take an example from the Body Wash category. Two leading companies come up with competing products. One is black and the other is red. By the time they hit the shelf, the private labelers have reserve engineered the product with some verisimilitude, and now they too offer a black and a red product. The difference is the branded product costs 10-times as much as the steeply discounted private-label product.
Private label was once only a defensive game, a copy-and-cost-cut play. Now, however, private labelers are creating new brands and products that take them up the value chain with an increasing focus on higher quality, better experiences, and their companion, a higher self price point.
Private label already won the price war and continues to turn categories into commodities. Now, private labelers are beginning to win the brand wars.
Given this situation, it is time from branded product companies to activate new business models: create joint ventures, develop radical and own-able new products, selling in new channels, or launching their own stores.
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Michael Graber is the managing partner of the Southern Growth Studio, an innovation and strategic growth firm based in Memphis, TN and the author of Going Electric. Visit www.southerngrowthstudio.com to learn more.
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