From private label to private brands: What U.S. retailers can learn from the U.K.

The U.K. is the most sophisticated private brand retail market in the world with the highest penetration and share of private brands – 52.5% according to an IRI 2018 report. British consumers have, for some time now, been shifting their buying criteria to demand more value, better service, and greater convenience.

Last summer, a BBC News article identified that there is a "retail revolution" underway when it comes to private brand products. It's a revolution that is presenting quite a challenge for the likes of Nestle and Unilever, which manage many of the world's leading consumer brands.

Grocery retailers in the U.K. aren’t slowing down this rate of innovation and continue to adapt their private brand initiatives and products to meet these evolving consumer needs and to promote brand loyalty.

Private brand sets retailers apart

According to The Grocer, U.K. supermarkets are using private brand to differentiate themselves from one another – which is harder to do with manufacturer brands. Their elaborate private brand architectures also mean they can develop sophisticated and diverse portfolios that are much harder for manufacturer brands to develop, particularly on the fresh and chilled sides. In the past few years, there has been a big shift by U.K. retailers, both large and small, towards buying from small, innovative manufacturers, as they understand that entrepreneurs bring innovation and freshness to their shelves.

Getting small suppliers introduced to big retailers

According to Entrepreneur Handbook LTD, most U.K. supermarkets and High Street retailers now have a structured route to bring them into contact with new, small suppliers. Tesco, for example, holds regional roadshows for small food producers, where the manufacturers can meet the supermarket’s senior buyers face to face. British retailer Argos, occasionally holds open days for inventors and small suppliers to meet the buying team.

In addition to Tesco, Sainsbury’s has a program called 'Supply Something New', to make it easier for small businesses to supply the retailer by providing free training days, technical support, and supplier certification. Waitrose’s locally and regionally produced initiative now includes around 1,200 product lines from small suppliers.

What does this mean for US retailers and their private brands? 

U.S. private brand sales are projected to grow to capture 25% of dollar share in the next decade. Retailers also earn 25–35% higher gross margins on private brand compared to manufacturer brands. Finding innovative, reliable and committed suppliers is key to developing strong, compelling private brand products and beating the competition.

Trading partner collaboration is essential, according to Doug Baker, VP Private Brands, at the Food Marketing Institute. What’s going to either aide success or secure failure for some private brands is how trading partners change the collaboration model to better meet the many metrics and demands facing private brands today.

In addition, U.S. retailers must take a page out of the U.K. retailers’ playbook and create an environment where they can nurture potential, mitigate risk and harness the innovation and agility of smaller suppliers. U.K. retailers use a holistic approach that can reveal innovative ways to bring trends to life, reduce total costs and unlock hidden value with their suppliers. For U.S. retailers, success will be about finding new innovative products, including local and regional items, that are truly unique, have an interesting heritage, and most importantly, taste great.

Retailer top tips to make sourcing more strategic

1. Make the sourcing process quick, easy, and accessible.

2. Provide potential suppliers access via a unique web portal.

3. Support suppliers through the application process by providing quick feedback.

4. Provide knowledge/training on how suppliers can make their products more attractive or compliant with requirements.

Retailers need to think of investment in a sourcing portal as being part of their investment in innovation and quality. A supplier’s size is generally irrelevant when it comes to supporting that goal.

The path to success lies in strategic collaboration with suppliers. Strategic collaboration requires a different mindset between retailer and supply partners, as well as the process and capabilities that allow them to work more closely to identify consumer demand and react to it. It’s all about jointly focusing on innovation.

Steven Howell

Steven Howell

Steven brings more than 30 years of global experience in retail, CPG manufacturing, consulting, and technology to the Private Brands Industry. He specializes in product lifecycle management process design, supply chain management, organization design, business process improvement, project management, and system design and implementation. Steven has worked with organizations in North and South America on Business Development, Sales, Organization structure, Business Process, Technology implementation, and supply chain issues by understanding their business needs and translating into process designs, requirements and solutions, building key business & organizational capabilities.


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