Introduction: As China's retail efficiency revolution advances, private brands are also being pursued by retailers. By 2025, almost all sizable retail companies, whether KA, CVS, discount formats, or instant retail, are trying or promoting private brands. It cannot be denied that a number of Chinese retail enterprises have developed their private brands quite well. Of course, from the perspective of retail history, it is an inevitable trend for retailers to venture into private brands; it's just a matter of time. But given the current state of the industry, when most enterprises seem unable to fully distinguish between PB (Private Brand) and PL (Private Label) products and their corresponding cores, it is hard to say that venturing into private brands is the right choice. What is the product positioning of private brands? Is there a department that can properly handle the development framework of private brands? How to balance the shelf relationship between branded products and private brands... There are a series of such questions that retail enterprises need to answer clearly. China's Retail: Chaos in Private Brand Development In the past two years, developing private brands has been a very hot topic, with national and regional supermarket chains all trying to do it. But the current market situation seems to be that many retail enterprises do not have time to understand it structurally. For example: 1) Which categories are suitable for planning private brands? 2) How to view private brands with a product mindset? Without even thinking through the core issues, they have already started developing private brands, anxious about falling behind competitors. As a result, many chaotic phenomena have emerged in private brand development, such as doing whatever has large volume, without considering the original intention of developing private brands. Carefully reviewing the categories most commonly attempted for private brand development, milk is certainly one of the representatives. From the perspective of the retailer's own demands, this type of product development brings nothing special; it's just that the industry chain is mature and product development is simple. It represents a very typical category of products: high sales volume but raw materials are strongly controlled by manufacturers, and market competition leads to low product margins.

  • Sales: The category is high-turnover, with traffic-attracting attributes; low prices do not increase overall customer spending;
  • Profit: Low-margin category, and without the advantage of brand owners controlling pastures, it cannot contribute significantly higher profits than branded products;
  • Brand trust: With two giants and a host of regional leaders already existing, consumers have high awareness, and rebuilding brand trust requires huge costs. Similar products include tissue paper, rice, flour, oil, etc., and some categories even have strong leading brands. As a result, many private brands have become homogeneous goods with "low necessity or unstable quality," and are even "ruined" by the market, yet the market is flooded with private brands in these categories. For retailers, it is important to understand: low price does not mean cheap; it's not a discount on quality but a demystification of the brand. In addition, for certain categories, excessive brand premiums are a harm to consumers. Retailers helping consumers bring down prices is essentially considering things from the consumer's perspective. Take water as an example: bottled water has returned to the 0.8 yuan era, and retailers still have decent profits. This kind of private brand development strategy is clearly politically correct in the consumer field. High premiums are a disaster area in high-margin categories such as alcohol and beverages. In the era of consumption equality, brands need to be demystified. But for many categories, if retailers only want to bring down prices, and under the established margin rules force manufacturers to find ways to supply, it may be counterproductive. Especially for non-deeply processed FMCG products, after stripping manufacturing costs, the main components are agricultural products or bulk raw materials. Raw materials are priced according to quality; excessive price suppression will only lead to quality discounting. Many retail private brands have this problem. (All the above are from real comments on Xiaohongshu) It is precisely because of this that there are many private brands in the market with low necessity or not-so-good quality, making it seem that private brands are almost being ruined by the market. Origin: Why do retail enterprises do private brands? Private brands are not a new thing; they are a sign of maturity when retail develops to a certain stage. Therefore, the solution to private brands can, to some extent, be found in developed markets. From the history of global retail development, as early as the early 20th century, some retailers began to try their own products, with the original intention of reducing dependence on brand owners. For example, in 1901, French retailer Casino began producing its own candy, spirits, and liqueurs; in 1914, Dutch retailer Albert Heijn began producing its own biscuits and candy; in 1924, Tesco launched its own brand of tea... Since then, retailers around the world have never stopped developing private brands. From the initial low-price imitation of product brands to later independent thinking in product development, it has gone through a long process. If early retailers launched private brands to get rid of dependence on brand owners, then later it was more for retailers to stand out from intense competition among peers. It is precisely for this reason that textbook cases like Costco's Kirkland and 7-Eleven's 7-11 series have emerged. Taking 7-Eleven as an example, private brand development is a complex systematic project, with a huge and slow progress. Retailers build consumer loyalty to the store by developing their own characteristics, thereby achieving long-term stable business results. From market research feedback, this strategy of retailers is clearly effective; consumers trust channels more than brands. According to Mintel's "2024 European and American Market Private Label Food and Beverage Trends," brand recognition in most categories has fallen below 50% or even lower. In 2023, American consumers' preference for brands was already generally low. Excerpt from "2024 European and American Market Private Label Food and Beverage Trends" Retailers continuously use private brands to subtly educate the market, and consumers gradually adapt to de-branding. The development of retailer private brands is no longer a simple horizontal comparison with product brands. It is more driven by category management methods, respecting consumer choices. Current Status: Mature Retail Markets Private Brand Penetration Continues to Rise If private brands are a definite trend, then mature retail markets have already set an example for us. According to the latest survey by PLMA (Private Label Manufacturers Association), private brand retail sales in Europe account for as high as 34%. Although the pace of private brand retail penetration varies by country, they are generally still in a state of continuous acceleration. Trend of foreign private brand development, accounting for 1/3 of grocery retail sales, data source: PLMA Moreover, from another PLMA survey, we can see that in the past three years, the growth rate of private brands in the overall US grocery market has been significantly higher than that of product brands. Private brand sales growth has been significantly higher than product brands in recent years, data source: PLMA This means that the market penetration of private brands can continue to increase. But if we look at the 100-plus years of private brand development history in the entire European and American retail market, there is no doubt that the path of private brand development is long and slow. In contrast, in the current Chinese market, private brand retail penetration in the grocery market is only 6%, far lower than developed retail markets. Although in the past two years, due to competitive pressure, retailers have significantly accelerated the pace of private brand development. The average number of new private brand products developed by each retailer per year has increased from 83 to 111, and then to 142, with an average annual update rate as high as 80%. Distribution of the number of private brand products developed by retailers, data source: Private Brand Industry Research Institute But even so, over a long cycle, the development of private brands in China is still at a very early stage. Although it looks lively now, with retailers testing the waters of private brands, it is unknown how many years of development it will take for private brands to influence consumer purchasing habits on a large scale and for consumers to get used to de-branding. And in this process, how many private brand developments will survive and how many will be eliminated need time to verify. The path of private brand development in China is still very long.