Alvarez & Marsal Report Highlights Private Brand Retailers' Market Outperformance

Top private brand retailers are outpacing the market, according to a new report by Alvarez & Marsal’s Consumer and Retail Group (A&M CRG). The report, titled Accelerate your Private Brand journey to win with customers and shareholders, indicates that private label spending in the U.S. accounts for 20% of the total market and is projected to rise to 24% by 2030.

The study shows that the top four private brand retailers experienced a 144% growth in stock prices over the past five years and have opened over 250 new stores in the past year alone. The report highlights that seven out of the top ten retailers by grocery dollar share are top private brand players, suggesting a strong correlation between private brand success and overall financial performance.

Marco Valentini, Managing Director at A&M CRG, emphasizes the commitment of C-level executives in top-performing grocers to grow their own brands. “The best players act differently from the rest of the pack. Their C-level executives are committed to growing their own brands and driving differentiation through them,” said Valentini.

The report underscores several critical enablers for winning with private brands, including:

Value Perception: Private brand products should be priced 30 to 50% lower than national brands while maintaining equal or superior quality. Consumers predominantly cite value as a key driver for purchasing decisions.

Product Innovation/Differentiation: Tailoring private brand products to customer demographics and preferences is crucial. Quality and taste are the second most important factors influencing consumer choices.

Margin Management: Private brand margins generally exceed those of national brands. This approach allows retailers to offer better unit economics while driving value for customers without diluting margins through excessive price promotions.

Brand Development: Building trust in private label brands is essential as over 80% of shoppers base their decisions on brand trust. Successful private brands positively impact the overall perception of the retailer’s brand.

Sustainable Sourcing: Controlling product development, packaging, sourcing, and supply chain operations enables retailers to meet specific sustainability goals, which is particularly important for Gen Z and Millennial shoppers.

John Clear, Senior Director at A&M CRG, adds that a comprehensive private brand strategy is vital for grocers to remain competitive. “To unlock the value of private label, grocers need to have a clear plan in place: a differentiated brand architecture and consistent positioning across categories; scalable processes and innovation capabilities that will ensure their success is repeatable,” he stated.

For more details, the full report can be accessed here.