Innovation in Private Label – Innovate Podcast
The Innovate Podcast is a biweekly series of discussions with CPG Innovation experts, on how to innovate with success in an ever-changing world.
In the eighth episode, our host Ben Davies, Founder of Vypr, was joined by International Private Label Consult (IPLC) Partner, Paul Stainton. Having had extensive experience working for large retailers, including being the first UK buyer for Aldi, Paul discussed the growth opportunities innovation can bring to the Private Label sector.
Listen to the full episode using the links below, and don’t forget to subscribe so you never miss an episode.
Read the highlights below.
Throughout the episode, Paul emphasised the huge opportunity for private label, especially now that the cost of living crisis is causing shifts in consumer behaviour.
“It’s a huge opportunity for private label, always is and always has been when we’ve been in a recession, or high interest rates, or people’s spending power has reduced. The cost of living crisis has really bit and it’s already being seen worldwide, in terms of a spending choice into private label.”
Due to consumers switching into purchasing more private label products, mainly due to their affordability, Paul noted the importance of retailers and private label manufacturers focusing on these offerings right now to avoid struggling in the upcoming months. But how can they optimise these ranges? Let’s discover more below.
The Role of Innovation
Innovation has a huge role to play in optimising private label offerings for success, as Paul emphasised in the episode. Without developing great offerings, companies risk losing consumer interest and therefore loyalty, and this applies for both retailers within their private label range, or manufacturers/suppliers in helping these retailer customers.
“It’s got a huge role to play, because what else are you looking at other than just firefighting with cost and availability.”
Optimising products by generating new ideas is crucial, especially now consumers are shopping around more to find the best price and quality, Paul mentioned.
“One of the outcomes of the cost of living crisis is that consumers are shopping around. Loyalty has definitely diminished certainly across some of the established retailers, and we’re seeing a lot of consumers both choosing to go over and shop at discounters and variety stores, and also spending less at their traditional supermarket.”
It’s important to remember that this innovation doesn’t only refer to investing in new product development (NPD) but existing product development (EPD) too – meaning organisations should stay on top of shifting behavioural patterns, as we’ll explore more on in the next section.
“One way that all retailers should be trying to keep hold of their customers is by launching great new innovative products, keeping their range fresh.”
The Role of Business Proactivity
Paul emphasised the need for businesses to be more proactive when innovating by, for example, conducting research to keep pace with shifting behaviour.
“The way you’re going to keep your business with your key customers is to be on the front foot, be proactive, it’s absolutely essential for private label manufacturers, as well as branded manufacturers”
Private label has an advantage over brands here, with its ability to be much quicker and more adventurous in launching innovative products, compared to brands that often need to be more careful and conduct lots of taste tests, for example.
“Brands are expected to innovate, but the speed to market can be much slower… lot of investment required… within private label it’s a lot more dynamic, speed to market can be quicker – needs to be quicker – … and you can be a little bit more adventurous in what you launch”
For this reason, Paul believes manufacturers specifically should conduct plenty of research to understand where their category currently stands and what opportunities are presenting themselves, so they can be proactive to their main customers (retailers), highlighting what they should be doing in the category. After all, retailers find themselves busier than ever, and so suppliers that do this give themselves a competitive advantage to really progress.
“Retailers themselves are really really busy, they’re managing cost price increases, availability issues… they are having less time to go out and look to see what’s going on, where new innovation is going to come from, so they be will expecting their suppliers to do it, so it’s absolutely essential”
Lessons from Popular Discounters
As an example of successful private label offerings in the industry, Paul discussed how discount retailer Aldi stepped-up their offerings to reach the status they hold today.
Aldi used to place more emphasis on price rather than quality, but decided that in order to be able to capture consumers from the big 4, they needed to focus on other things, as Paul mentioned:
“A more relevant range, a better quality, other things such as great packaging, fantastic in-store experience”
Paul went on to describe how both Aldi and other popular discounter Lidl developed a ‘let’s start again’ approach, where they wanted to keep a limited range but also allow the consumer to be able to conduct most of their big shop with them. They combined this with an increase in the quality of their products, by going back to suppliers and giving them benchmarks of what they needed to get to.
This formula (along with smart advertising) led to a more positive experience, and ultimately success.
“In conclusion, you’ve got range, you’ve got quality, and you’ve got in-store experience, and if you get all those things right… people start talking positively about the discount experience and discount products, and therefore it’s no longer seen as being an embarrassment to shop at the discounters, in fact it’s seen as being smart.”
Paul also praised Aldi’s strategy of having a great premium own label tier with their innovative ‘Specially Selected’ range, leading to securing just over 14% of this tier in the market. He mentioned that this focus has really lifted the perceptions around the overall own label range at the discounter.
“Over a period of time that then enables the overall impression of the own label range to grow even higher, if you have a really good premium tier, amazing quality, innovative, highly regarding and well-sourced products, it then raises the profile of the rest of the products that you’re selling”
Whilst most sales within private label come from the standard tier, this is definitely something to consider, as it has changed the market.
Again, Paul believes that it’s down to suppliers to be proactive and innovative and come up with ideas like Aldi does particularly well, especially in their seasonal premium ranges, leading to lots of their successes.
The Role of Differentiation
Lastly, Paul believes the challenge (especially for the bigger supermarkets) is to come up with differentiated products from others. This entails not only copying what is successful, but creating offerings that can’t be found elsewhere and really resonate with consumers to deliver a great experience and solution for their needs.
This will be the key to grabbing shifting consumer interest and loyalty, as we mentioned before.
“Differentiation is the key about private label, and it’s coming up with unique products that aren’t available elsewhere.”
To conclude, this episode uncovered that the opportunity for private label products is huge, especially in the current economic climate. Interestingly though, when it comes to pricing, Paul noted that there is no longer a ‘price ceiling’ for private label products, touting Tesco’s restaurant collection as a prime example of this. If you want to discover more about this, along with further excusive insight from the industry, watch the full episode using the links below.