As the world grapples with a cost-of-living crisis, consumers are understandably drawn to cheaper supermarket options. But is the rapid expansion of private label products helping or hurting us in the long run? Are we unknowingly witnessing the slow death of consumer choice and innovation?
Globally, the trend of retailers pushing ‘Private Label’ products—also known as ‘home brands’ or ‘phantom brands’—continues unabated. Major supermarkets have even employed subtle strategies to encourage more consumers to choose these lesser-known, phantom brands. For small-batch producers, challenger brands, and artisanal creators, this trend is nothing short of a crisis. As advocates for these emerging brands, it’s time we have a real conversation about what’s happening behind the scenes.
A Catch-22 for Brand Owners
Let’s get one thing clear: brand owners are also consumers, but not all consumers are brand owners. And herein lies the Catch-22. As consumers, particularly in the current economic climate, it’s easy to be drawn to budget-friendly private label products. But for brand owners, the rise of these in-house supermarket brands means reduced shelf space, fewer opportunities to stand out, and, frankly, a lot of imitation.
Private label products are often “inspired” by the innovative creations of small-batch producers, yet they come in at lower prices, backed by the immense buying power of the retailers themselves. This isn’t a new phenomenon—retailers like Marks & Spencer and Coles have been expanding their private labels for decades. Recently, over in the US, Walmart unveiled its largest private label food launch in two decades with bettergoods, a line of 300 products priced under $5.
This expansion of private label products boosts the profit margins of major supermarkets, and provides lower-cost items for consumers, but what is the payoff when it comes to consumer choice?
Private Label Is Not New, But It’s Growing Fast
Private label products have been around for a long time, and they aren’t just confined to food. From toiletries to baby products and even pet care, supermarkets are filling their aisles with own-brand alternatives. Woolworths, for instance, is doubling down on its home brand, even offering free meals at pop-ups to promote its in-house products.
On the surface, this might seem like a win for consumers looking to save money. But dig a little deeper, and it becomes clear that private labels aren’t just about affordability—they’re about dominance and boosting profits for the major players. In 2023 the Sydney Morning Herald reported that Coles’ exclusive brand sales surged by 11.4% in the three months leading up to March, reaching $2.9 billion; while Woolworths saw its home brand sales rise by 9.1%, with certain categories like pantry staples and dairy products surging by up to 20%.
The fact is,when private labels thrive, the market becomes more concentrated, giving big retailers unprecedented power over the products we buy.
Innovation Takes a Back Seat
And here’s the real problem: when supermarkets flood the market with private label products, innovation takes a back seat. Small, independent brands are the lifeblood of creativity in the consumer packaged goods (CPG) industry. They are the ones experimenting with new flavours, textures, ingredients, processes and even things like sustainability and ethical sourcing. But with fewer opportunities to get their products on shelves, these brands are finding it harder to compete.
The Australian Bureau of Statistics shows the clear benefits of innovation:
- 45% of businesses that innovate see improved customer service.
- 41% enjoy increased revenue.
- 39% experience higher productivity.
If we allow private labels to dominate the market, we risk losing the very innovation that benefits consumers and the economy.
Less Choice, Less Competition
As consumers, we’re often drawn to the convenience and lower prices of private labels, but at what cost? Private label dominance leads to fewer choices, not more. Without a vibrant market of small producers, we’re left with a homogenised shopping experience where the same few companies control most of what we buy.
We also lose out on the opportunity to discover new, exciting products. The rise of private labels essentially means that instead of exploring the next innovative flavour from an emerging brand, we’ll be choosing between multiple versions of the same basic products with the same flavour rotations – all produced by the supermarket giants.
What Can We Do to Fix It?
While private label products offer short-term savings, they may not be the best choice for the long-term health of the market. Consumers need to think beyond the price tag and consider the broader impact on innovation and choice. As brand owners, there’s a need to continue pushing for visibility and innovation, even in the face of growing competition from supermarkets’ in-house lines.
So, the next time you’re in the grocery aisle, ask yourself: Are you willing to spend a little more to support the brands that innovate and keep consumer choice alive?
The future of consumer choice—and the innovation that comes with it—depends on it.