How Retailers Can Work With Consumer Brands To Fit Their Private Label Strategies

Retail analysts often pit national brand success against private brand success: Reports cite who is outpacing who in sales, or who owns a greater share of the market. For instance, currently, private label sales are seeing record growth, increasing dollar sales by 8.2% in the first half of 2023 compared to a 5% growth by national brands.

But, from a consumer’s perspective, be it national brands or store brands, they just want the best products available on shelves. To that end, the retail industry should focus less on how each category is performing separately and more on how retailers and CPGs can work together to build assortments that answer shoppers’ needs and improve the shopping experience.

With predictive analytics and data-driven insights, collaboration like this can happen today. Brands can come to retailers with expert forecasts on how national CPGs fit growing private label portfolios, including how assortments can match shopper preferences by region or individual store.

Working Together Toward Private Brand Growth

With the new year well under way, retailers — rightfully so — are looking to continue to tout their growing private label assortments. Consumers are adjusting to a period of disinflation, which means they’re still being cautious with their spending, and private label is a way to gain favor with value-seeking shoppers.

Store brand products also enhance overall profit margins for retailers, which is another reason for retailers to go full steam ahead on their own brand strategies. But what does this mean from a strategy perspective? How can retailers improve assortments alongside national brand counterparts? 

Personally, I come to these questions with experience in merchandising at 7-Eleven and Giant Eagle, where I helped transform the grocer’s own brand program. I’ve seen what it’s like on both sides of the table — national brands fighting for space amid private brand pressures and private brands looking to respond to national brand successes. 

Where AI and predictive analytics come in is by sharing an unbiased opinion on how products are performing — and will perform for months down the road — to give retailers an honest look at what could be the most effective assortment. Consumer brands that want to win over retailers can input sales data, attitudinal surveys, macroeconomic reports, social listening insights, and a range of data into an AI model. The results are precise recommendations on where brands and retailers can collaborate to grow private label and national brands together. 

The insights can help lift overall category sales across the store. Top retailers with powerful private brands should encourage consumer brands to work with them to build cohesive assortments. 

Optimizing Assortments Around Private Brands

Top-tier food retailers, particularly, have private brand portfolios that stretch across categories and sub-categories (addressing consumer attributes like organic, free from, Keto-friendly, etc.). The expanding breadth of items presents a lot of work for retailers when choosing store assortments and planning shelf sets.

National brand partners can come to retailers with AI-powered data that supports specific product goals within their store brand portfolios. A national brand can use AI to run endless tests to arrange and rearrange private brand and national brand products (competitors included) and identify which assortments will sell the most products. 

With this technology, consumer brands can establish leadership positions with their retailer partners. Let’s see how:

• Localize Assortments Down to the Store Level 

Consider a c-store with locations across various regions from small towns to urban cities. A flavored water brand can leverage predictive analytics to help customize product assortments at each of those individual stores in the c-store’s network. It would take teams months to work through that level of granularity. The process is tedious, painful and often the results are prone to errors. What’s more, the water brand and convenience retailer would likely bring bias to the table.

AI reveals customized, recommended assortments within minutes, identifying which flavors of the c-store’s private brand perform well at each location and how the national brand’s flavors can best complement. Each store’s shopper preferences can be addressed, and the analytics can identify what assortment is most personal to each store’s shopper base.

• Build Optimal Shelf Presence

A cookie brand can use AI to identify optimal shelf sets inside a grocery partner’s stores. The national brand can test how well private brand cookies perform when slotted near certain cookie types, flavors or attributes, and the brand can optimally plan shelf space around the retailer’s private label cookies.

The cookie brand can further see how certain shelf sets grow their range of products without taking away from a retailer’s private label offerings. They can run scenarios of how to find a space plan that grows the category and best serves both the retailer’s private brands strategy and the CPG’s growth items. 

• Forecast Demand Trends Over Time

Getting readouts on how certain private brand products and national brands will perform over time is another benefit of AI. A paper towel brand, for example, can alert a mass merchant if the AI uncovers potential downturns in the chain’s private label portfolio. 

Additionally, the consumer brand can suggest recommended assortments, based on the AI’s forecast, to prevent immediate or long-term sales losses. The AI can identify trends in private brand demand compared to the paper towel brand’s products and spot changes in sales. This insight then enables the paper towel brand to come to its retailers and power data-driven conversations that look at maintaining sales success for both parties long term.

Enhancing Collaboration Between CPGs and Retailers

AI can bring consumer brands and retailers together in new ways, providing a backbone of unbiased insights and data that anchor high-level strategic conversations. This can extend to a retailer’s private brand team and how they work to optimize space alongside national brands.

Retailers may request CPGs leverage AI to optimize assortments and space planning. In my previous merchandising roles, I knew I consistently achieved greater success when working with consumer brands that came to the table prepared with the best insights and analytics. CPGs that understood the private brand strategy, the penetration goals, and or space mandates, and came prepared with a win-win plan for the category stood out. What’s more, at times, those consumer brands would earn supplier of the year awards.

In the end, yes, the category overall will be optimized to its fullest potential, but customers will be the real winners. The shopping experience is greatly improved when your assortments are tailor-made — the right mix of national brands and private brands that meet the desires of shoppers at each store.