From the Wall Street Journal:
“Makers of private-label goods from groceries to paper towels got knocked down by the pandemic and subsequent recovery. Now they are getting back in the game.
“In its earliest stages, the Covid-19 pandemic was said to have driven a shift to ‘trusted’ brands among locked-down households. But the bigger issue was brand availability, as disruptions to supply chains that lasted years proved especially punishing for private-label manufacturers.
“These companies typically service multiple retailers, each with their own customized needs on product and packaging. As a result, their supply chains and manufacturing processes tend to be more complex and less flexible than major brands that make products at greater scale for a nationwide market. On top of that, multiple rounds of government stimulus and a subsequent tight labor market left households feeling flush with cash, especially at the lower ends of the income spectrum where private-label demand is highest. This meant consumers felt freer to spend a bit more on name-brand options.
“Now, though, those trends are reversing. Consumers, feeling increasingly pinched by inflation, are starting to trade down again to store brands, and the makers of those goods are finally getting back to prepandemic efficiency levels.
KC’s View:
This story just reinforces the traditional view of private label – that it mostly does well when money is tight, but not so much in prosperity.
Own-label becomes more interesting when people down’t trade down to it, but rather trade up to it – seeing it as a better choice than national brands. That’s something that stores as different as Dorothy Lane Markets and Costco have been able to do effectively.
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