Private Label vs. Consumer Brands Debated at OPS

An Organic Produce Summit ed session exploring the growth of private labels in organics turned into a fairly solid endorsement of brand labels and a recitation of many of the disadvantages of the increasingly popular private label concept.

Moderated by former retailer Randy Riley, who is now president of GoldenSun Insights, which helps to bring products to market, the session began with an overview of the growth of private label brands, noting that private or store labels are in a double-digit growth mode, aided in recent years by both the pandemic and inflationary concerns. Supply issues led consumers to turn to private labels at a quicker pace, with the category now accounting for $120 billion in retail sales, which represents 18 percent of the market.

Moderator Randy Riley (GoldenSun Insights) with panelists Jeff Cady (Tops Friendly Markets), Dave Hewitt (4Earth Farms), and Josh Leichter (Pacific Trellis Fruit)

Riley, who admitted to being a proponent of the concept when he wore a retailer’s hat at Kroger, noted that the old mindset that a private label represented inferior product at a value price is no longer accurate. He asked the panelists to debate private vs. consumer brands and discuss such topics as who is driving the growth of each sector, how it impacts supplier innovation, and what the future holds for each strategy.

The panel included Jeff Cady, vice president of produce and floral at Tops Friendly Markets; Josh Leichter, president of Pacific Trellis Fruit; and Dave Hewitt, vice president of sales for 4Earth Farms.

Riley, who admitted to being a proponent of the concept when he wore a retailer’s hat at Kroger, noted that the old mindset that a private label represented inferior product at a value price is no longer accurate.

To be sure, the panelists did agree with Riley’s assertions that private labels have been gaining favor in the retail sector and that their perception as mostly being a value play is inaccurate. Cady said private labels have evolved over the years and are no longer just a price play. He said Tops does work with grower-shippers on private label programs and agreed the quality of private label product is much improved.

Leichter and Hewitt noted that their private label business has increased in recent years. Hewitt said about two-thirds of 4Earth’s business involves private label packing, adding that there has also been a big uptick in private label organics. In fact, he indicated that the ability of retailers to put their name on the organic product has increased the number of organic SKUs they are willing to carry.

Panelists Jeff Cady (Tops Friendly Markets), Dave Hewitt (4Earth Farms), and Josh Leichter (Pacific Trellis Fruit)

“Private label is growing exponentially for organics,” he said.

Even Leichter, whose company markets the well-established Dulcinea brand of melons, noted that private label sales grew significantly during the pandemic as consumers expressed their loyalty to their retailer as supply issues of branded product surfaced.

Cady said private label has evolved over the years, and it is no longer just a price play. He said Tops does work with grower-shippers on private label programs and agreed the quality of private label product is much improved.

“The profile of private label looking for cheap product is 20 years in the past,” Leichter said.

As the discussion continued, issues associated with the growth of private labels in the produce industry began to surface. Tops’ Cady admitted that his biggest competitor in the Tops marketing region—mostly upstate New York—has gone heavily to private label, so he uses brands to his competitive advantage.

Jeff Cady, Vice President of Produce and Floral, Tops Friendly Markets

A good brand marketing program, Cady said, can communicate directly to consumers and build demand through on-package messaging as well as the use of digital assets and in-store promotions.

“The profile of private label looking for cheap product is 20 years in the past." - Josh Leichter

“I’m a brand guy,” Cady said. “My go-to-market strategy in produce is branded product.”

During the course of the discussion, Cady pointed out that private labels do not tell who the grower is or often where the product is grown. As such, Cady questioned whether private label is especially ill-suited for organic produce where consumers are looking for transparency. Cady quipped that the Tops name is on the package—and clearly the retailer did not grow it.

Josh Leichter, President, Pacific Trellis Fruit

The Tops executive said he has an upcoming promotion with Dulcinea’s Pureheart melon that is impossible to duplicate with a generic melon in a private label. Dulcinea has created a brand that resonates with Tops’ shoppers.

4Earth has changed its business model to accommodate the growth of private label, but the same attributes that have allowed the company to thrive could be considered an argument against continued growth of private label.

“I’m a brand guy. My go-to-market strategy in produce is branded product.” - Jeff Cady

Not every supplier can compete, Hewitt said, when you sign up to be the provider for a private label program. “You can’t be out of product, especially with organics,” he said.

"When selling the company brand, running short on supply is not a deal breaker,” Hewitt said. “Supply is huge” with a private label program, he said, adding that as demand grows for private label product, the retailer expectations grow along with it, and it becomes very difficult to manage.

Dave Hewitt, Vice President of Sales, 4Earth Farms

Leichter said there is a lot of innovation and cost that go into bringing a product to market and indicated it is more difficult to justify that expense if you are not putting your own name on the product.

"When selling the company brand, running short on supply is not a deal breaker,” Hewitt said. “Supply is huge” with a private label program, he said, adding that as demand grows for private label product, the retailer expectations grow along with it, and it becomes very difficult to manage.

Cady called it wanting the supplier “to have skin in the game.” If the supplier’s name is on the product, rather than the retailer’s, he clearly thinks it is a win-win. However, he did admit that he is fighting the trend and that some Tops executives would like to see more emphasis placed on private label in produce.

An unnamed audience member also noted that there is a packaging cost for grower-shippers when getting involved in a private label promotion. Leichter agreed, noting that suppliers are operating on very small margins and the printing of more private label packaging for a specific retailer than is utilized could wipe out any profit from the program.