PLMA 2013 Trade Show: Private-Label Innovation Challenges Brands
More than 50 coffee/cappuccino/cocoa suppliers were at the show, and many of these featured private-label single-serve products, which one supplier said account for up to 25% of his retailers’ pod category sales. Many were emphasizing recyclable and compostable single-serve pods, including Rogers Family Co. Inc., Café Vittoria and others. “Biodegradable is the new thing in single-serve [coffee]. The old [plastic cup] technology is filling landfills,” one supplier said.
TreeHouse Foods Inc. displayed new varieties of its pods, including a Fair Trade Organics coffee pod, and a representative said the company is “one of the largest contributors to Fair Trade USA.” At Mother Parker Tea & Coffee Inc., a new office coffee brewer called the RC 400 was on display, featuring a touchscreen with multiple options for the size and type of beverage brewed. None of these suppliers is licensed with Green Mountain Coffee Roasters Inc. (which was not present at the show), but none expressed concern about Green Mountain’s expected late-2014 launch of a Keurig machine that can detect -- and may limit usage of -- non-licensed pods. “About 20% of the [single-serve coffee] product will be non-licensed when [Green Mountain’s K2 machine] comes out,” one supplier said. Several of the private-label coffee pods suppliers said they are expanding or developing their own manufacturing capacity in anticipation of growing demand. “Clearly the growth in coffee is in single-serve, and it is purely incremental -- transferring from out-of-home to in-home. The business has remained stable in the mainstream [non single-serve coffee],” a representative of Massimo Zanetti Beverage Group said.
A concern in the private-label single-serve coffee category and many others is increasingly aggressive promotions from branded suppliers, particularly as input costs are decreasing. “A lot of the brands are sharpening their pencils. That is not good for private label,” a private-label buyer for a regional supermarket chain said. However, she and others said private label is managing to maintain a price spread of at least 15%, offering value to consumers, and a representative of a supplier of private-label products ranging from cereal to frozen foods in addition to its branded portfolio said, “Historically, over the broad stroke of categories, each time there is a recession, private-label penetration grows. What you see after that is a branded retrenchment with more promotions and marketing, but that is usually not sustainable.”
Some suppliers noted price is less of a factor in an increasing number of unique and often healthful store-brand items. “People who want a good-tasting, healthy product will pay a little more,” said a supplier of ground mushroom and beef burgers and meatballs. A supplier of gluten-free and conventional store-brand bread and baked goods said higher prices on the gluten-free items have been no barrier to sales. However, another supplier of plant-based meat-replacement products noted his company offers both conventional and more costly non-GMO versions because “there is a need for these healthier products across all income levels.” The move to higher-end and healthier private labels often is driven by retailers upgrading their store brands. One supplier said savvy retailers such as Trader Joe’s Co. and The Kroger Co. seek out one-of-a-kind private-label products that consumers can buy only at their stores. “If you look at some retailers, they have been able to use private label as a differentiating tool,” he said.
With retail buyers’ attendance at the convention up 5% yy, the buyers attending the show represented channels outside grocery -- such as bed/bath, dollar stores and specialty chains -- in greater numbers than in previous years. One supplier mentioned the importance of moving her private label into the high-growth dollar channel, though wholesale pricing can be challenging.
WHAT: Private Label Manufacturers Association’s 2013 Private Label Trade Show
WHEN: Nov. 17-19
WHERE: Rosemont Convention Center, Chicago
WHO: 4,500 attendees, including more than 1,000 private-label suppliers from 35 countries
ADDITIONAL QUOTES
On Private Label
“Look to Europe [to see private label’s potential]. It is a much more highly developed private-label market.”
“I think it has got to be at least 15% [price gap between brands and private label], if not more.”
“If the price gap is under 10%, it is not a value.”
On Organic/Sustainable Oroducts
“It used to be about saving the environment, but now it is much more.”
“Anyone who is still using plastic [doggy] bags is irresponsible.”
“Some thought gluten-free was a fad, but it is not.”
“As our population ages, people are eating less and less meat. We are trying to create food that is palatable to people who do eat meat.”
“There are a lot of people who do not want to go totally vegetarian.”
On Single-Serve Coffee
“A lot of people said the largest [private-label coffee pods] could get was the same as bagged coffee [7%-8%], but in the last year, it has exceeded 10%.”
“Here is the big difference in single-serve coffee: the flavor varieties. The consumer is like a kid in a candy shop.”
“Since we launched [store-brand coffee pods] last year, we have increased our capacity by several-fold.”
“We have many retailers who have a market share [for private-label single-serve coffee] of over 25%.”
“Ultimately, consumers will make their decisions [about the K2 machine]. Are we worried? No.”
“We are very focused in the office coffee space with a machine that will launch in early 2014.”
“Everybody is promoting right now, and this is the first time you have seen [aggressive] coffee promotions in the summer.”
“Green Mountain share losses will continue because more entrants are coming into the category.”
“Why do retailers want a supplier who has 100% of the market? Monopolistic will not help the market.”
