KEY INTERVIEW: New Private Label Growth Opportunities Exist for Innovative Ingredient Suppliers

25 May 2016 --- New opportunities are emerging for ingredient suppliers in the private label sector, as premium differentiation potential arises, according to Brian Sharoff, President of the Private Label Manufacturers Association (PLMA). Growth of private label is more dependent on upscale products, not downscale products and the ingredients space is no exception, he told FoodIngredientsFirst in an interview at the show.

More than 11,000 buyers and visitors from more than 110 countries are gathering at the RAI Exhibition Centre at the world’s largest private label trade show, PLMA’s 2016 “World of Private Label,” which opened yesterday.

A special attraction at this year’s Trade Show is PLMA’s Idea Supermarket, where visitors can see displays of the products which won PLMA’s 2016 Salute to Excellence Awards for innovation in private label. Forty-three retailers from 18 countries were given Awards and were recognized at ceremonies during the pre-show seminars. This year’s Salute to Excellence Awards have been expanded to include private label wines for the first time.

This year’s Idea Supermarket featured some focus on a whole group of trending ingredients. These include anything from ancient grains (e.g. chia) to probiotics and prebiotics. “It’s an attempt to get a little more attention to the importance of ingredients in the private label business. Over the years what generally has been the rule of thumb in private label has been the retailer looks at the A-brand and then finds a supplier who will make an exact replica of the A-brand. If the A-brand has some new ingredient the private brand is expected to have it. If the A-brand doesn’t have it, nobody expects the private label to have it,” Sharoff “We’re trying to break that mold a little bit by emphasizing some of the newer ingredients which younger people are interested in seeing in their products. To make the manufacturer accept that ingredients are a very important part of their sales and marketing strategy,” he added. 

New data was presented at this year’s event highlighting the continued role for private label and new growth opportunities for the sector. According to an analysis of retail brands value share in Europe (based on data on 11 years from 17 countries), retail brands accounted for 30.5% in 2015. This is down slightly from 2014 (30.6%), but the general pattern since 2005 (24.6%) has been one of growth. For example, in the UK, retail brands now account for a value share of 42%. 

“The growth of private label is more dependent on upscale products, not downscale products. If you analyze the growth of private label it really comes from products that are innovative, that have new ingredients, that have some special value added. It’s not your basic commodity type of products,” says Sharoff. 

The data again reiterates that the growth in private label is quality rather than price driven. “Everybody is concerned about price, but selecting a product it not price-driven, it’s quality-driven. If the product doesn’t have quality no one will do repeat business,” he notes.

Sharoff believes that manufacturers need to get out of the bad habit of simply thinking inside their own category too much and instead look further for innovation and should look at trends more holistically. “You can find lots of trends and then you might dismiss them because you say to yourself ‘I make such-and-such product and I don’t see how that trend relates to my category.’ But if you think about it within your category, then you can start making products which are relevant to trends,” he claims. 

He illustrates this with an example of breakfast opportunities for Mexican foods. “You may say to yourself ‘I’m in the food category, the trend is a big trend towards Mexican food. But I don’t make Mexican food so I’m not going to pay any attention to it.’ But if you think within the category, your category, you may say ‘Ah, but your category has breakfast food.’ And if you were to relate that to trend towards Mexican food, you might then be able to think about new products. If you think in terms of general trends you may not notice how they give you opportunities,” he says.

One example of a trend that is clearly relevant at this year’s PLMA is vegetarian products, with private label manufacturers quickly responding. “A lot of companies jump on board of that particular train. It doesn’t mean that vegan is suddenly going to become the lifestyle of most European consumers, but if there’s a segment – 2%, 5%, 8% – manufacturers look for that opportunity,” he notes. 

On this year’s PLMA Trade Show floor, attendees have the opportunity to visit more than 2,400 exhibiting companies, manufacturers and suppliers of fast-moving consumer goods from more than 70 countries. Products on display include fresh, frozen and refrigerated foods, dry grocery, and beverages as well as non-food categories. Featured on the trade show floor are nearly 60 national and regional pavilions, promoting their countries and spotlighting the products they make.

By Robin Wyers