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1/ Private label gaining share (41% growth since 2013 v. 7% for national brands). A few thoughts on why that matters.
storebrands.com/private-label-…
storebrands.com/private-label-…
2/ For about 15 years people that are even kind of remotely just a little bit connected with consumer have talked about a thesis that the large brands were going to get slaughtered from several directions. It can get boiled down to value.
3/ Value might be a) the same (or equivalent) quality product for less money, or b) it could be a new/innovative product (regardless of price).
National brands are getting crushed on both of those dimensions.
National brands are getting crushed on both of those dimensions.
4/ First- the obvious one is new/innovative products. We’ve covered that. That bee swarm is coming for Heinz, P&G, Coke, etc. Consumers want innovation, large brands aren’t supplying it. Thus they are losing consumers and market share).
5/ ….Oh and I guess they are losing CEOs too….
6/ ….well if we’re really being picky large retailers are realizing innovation is what consumers care about and it’s a bloodbath to try and compete on price, so lets them in on the scheme
7/ Anywhat, here is the kicker. Their safe, stable Cash Cows (a fun expression people don’t use enough)? Well Private Label is coming for you with a vengeance.
8/ Private Label quality has quietly but meaningfully increased meaningfully over the past 10-15 years. In addition, consumers have become more and more trusting of Private Label. Not just Costco, @WholeFoods and Trade Joes, but @amazon, @Sephora, etc.
9/ Consumer are realizing they can get equivalent quality from private label as they can a national brand. But at >20% discount in price. What was stigmatized 20 yrs ago is now a badge of honor to some consumers.
10/ Don’t believe me? Ever talk to a Trade Joes shopper? Or a Kirkland consumer that will tell you how it is better quality than national brands? Their NPS is amazing.
11/ As PL increases in mkt share, smart investors are also finding more ways to play it. Not all funds, but some. That market tends to be a volume game (selling large volume at low margin) so it is much more mid-market PE than it is venture, but its a good place to make money.
12/ That $ flowing in will accelerate share gain. Virtuous (or vicious) cycle. Hurts national brands even more.
13/ So now put yourself in the shoes of the most recent new CEO for a public CPG company....
14/ You are getting killed by bee swarm of smaller brands on a dimension you cant compete (innovation), private label is offering equivalent quality at lower price and your major customers (retailers) are scratching their heads on why they need that new size of Heinz 57.
Wow.
Wow.
