Private Label Brands Are Not Commodities

Larry LightApril 28, 20215 min

A private label brand is not the same as a commodity product. A recent trends report from Deloitte highlights a trend focused on the tension between commoditization and premiumization. Deloitte states, “To remain competitive, many retailers have shifted toward offering private labels…. While discount products (commodities) still represent the majority of private-label sales, the share of premium private labels continues to rise….”

Most retailers offering private label brands see their own labels as brands, not as commodity products. Even though a retailer may have a range of private label premium and non-premium offers, they are still brands.

Commodities are goods that can be interchanged with other products; that is, commodity products are equivalent or almost equivalent to other products with no customer interest in who is the source of trust.

Private label products are different. The exclusive brand represents the source of a trustworthy promise.

Trader Joe’s sells private label. Publix supermarkets sell an organic private brand, Greenwise. Whole Foods sells its 365 brand. 90% of Aldi’s products are private label: liveGfree, SimplyNature, Specially Selected, Fit & Active, Little Journey, Mama Cozzi’s, Parkview, Sea Queen, Little Salas Bar, Baker’s Corner, Friendly Farms, Stonemill, Winking Owl, Millville and Clancy’s. Big box stores such as Target, Costco, and Wal-Mart also have rosters of private label brands. These products are affordable but not commodities: to their owners, these brands have relevant and differentiated brand promises.

Private Label Example: Albertsons

A great example of private label products, each having relevant differentiators, are sold by Albertsons, the second largest supermarket chain in the U.S. Albertsons believes its own brands are integral to its enduring profitable growth, treating all of its private label products as brands not as commodities.

Albertsons began in 1939 in Boise, Idaho, founded by Joe Albertson. The brand partnered with Skaggs Drug Centers in 1969, creating the first combo food and drug stores. In the 1980s and 1990s, Albertsons bought many different grocery and drug retailers, expanding its footprint across western states and some eastern states including Pennsylvania, Delaware, Maryland, and New Jersey. In the first half of the 2000s, a new CEO restructured and sold off many underperforming stores, closing some of Albertsons’ regional districts.

By 2006, it became clear that the Albertsons acquisition strategy had generated more problems than profits. A consortium including private equity firm, Cerberus, bought the chain. Albertsons’ portfolio was divvied up among the consortium members. Cerberus owned a company called Albertsons LLC that included several grocery brands including Albertsons in nine U.S. states. This new Albertsons implemented an acquisition strategy and in January 2015, Albertsons LLC merged with Safeway.

Integrating Safeway might have harmed Albertsons. But, Albertsons became a more efficient, modern company. The chain is laser-focused on its strengths, one of which is its portfolio of powerful its private label brands. Supermarket News identified Albertsons as its 2020 Retailer of the Year.

When Albertsons went public, its CEO, Vivek Sankaran, in his prospectus letter, emphasized Albertsons’ strength in private label brands. Sankaran wrote, “ We continue to innovate with our Own Brands – purchased by 9 out of 10 Albertson’s shoppers – to drive customer engagement and loyalty as well as enhance profitability. We plan to launch approximately 800 new Own Brands items annually over the next few years and are proud to have built one of the largest USDA-certified organic brands, O Organics, which is one of our four Own Brands that exceed $1 billion of sales annually.”

The Albertsons Own Brands roster includes private label brands including these:

  • Signature Select: Main line of grocery products
  • Signature Farms: Produce Department brand for fresh fruits and vegetables. From produce to meats, great quality at an affordable price
  • Signature Care: Home and wellness products; effective, affordable products that help you live a healthy life
  • Signature Select: High quality products at an affordable price. Sharing all of life’s moments!
  • Signature Café: Brand used for things sold at the Deli counter, soups, and refrigerated food made by the Deli and sold in the Deli Department. Dinner’s ready! Pick up ready-to-serve entrees, sides, soups, and more
  • Signature Reserve: a curated, globally-sourced selection of products in pasta and pasta sauce, single-origin whole-bean coffee, loose-leaf tea, confections, and pie filling. Premium alternative to products in the Signature Select line. For life’s special moments. Ultra-premium, inspiring delicious discovery with expertly sourced flavors and ingredients
  • Organics: Organic products; purely delicious choices, certified to the highest organic standards
  • Open Nature: 100% natural products; all-around goodness and free from 110 food ingredients; BPA-free, tree-free, and plastic-free cutlery, straws, cups, eventually including bamboo tissues and washable rayon towels (to replace paper towels). Includes oat milk frozen desserts.
  • Lucerne Dairy: Main dairy brand, used for ice cream, cheese, yogurt, and milk; fresh dairy, straight from the farm. A family tradition for over 100 years.
  • Waterfront Bistro: Easy-to-prepare, restaurant-quality seafood at home.
  • Primo Taglio: Deli brand for meat and cheese; premium quality meats and cheeses, crafted with the finest ingredients
  • Debi Lilly Design: Floral and home décor products; bouquets, home décor, and gifts inspired by celebrity event planner, Debi Lilly
  • Value Corner: A wide range of simple, everyday products at unbeatable prices. A cheaper alternative to products in the Signature Select/Lucerne line

No Commodities Here

These Albertsons Own Brands are not commodities. Yes, there is a spectrum of offerings from simple, easy to high-end, premium, and a range of prices. But, it is not, as Deloitte states, a spectrum of commoditization to premiumization. Albertsons’ Own Brands that are not labeled “premium” does not mean these are commodity products. Each one makes a relevant, differentiated promise to customers, a promise that is not only about affordability but also about quality.

Chad Coester, senior VP of Own Brands told Supermarket News, in July 2020, “We’re passionate about innovating based on shoppers’ needs, desires, and the latest consumer trends. With these new items, we delivered something to surprise and delight every customer. Our new ice creams and frozen desserts give a spoonful of satisfaction and excitement with each bite. And we can all use a little fun.”

Chief Merchant, Geoff White, stated, “As customers get used to our brands and trust our brands, you can drive innovation within current categories and get into new categories. We’ve got an incredibly strong team that is built around innovation, category management, and product quality.”

Supermarket News wrote that Albertsons’ Own Brands portfolio is “a pillar of Albertsons’ overall growth strategy. Own Brands accounts for approximately 12,000 products.

In Albertsons’ most recent quarterly earnings report, the chain stated that Own Brands had $12.5 billion in sales. According to Albertsons, this is, “… seven times larger than its next-largest CPG company selling through its stores.”

Private label brands at the lower price ranges are still brands, with relevant, differentiated experiences. Albertsons’ attention to detail in creating its Own Brands portfolio, imbuing each private label brand with its own set of brand claims and its own brand character, demonstrates that regardless of price point, a private label brand is a brand, not a commodity.

Contributed to Branding Strategy Insider by: Larry Light, CEO of Arcature

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