Private Label Entry Case Studies
Amazon's private-label milk and coconut water and Target's private label food and grocery brand are two case studies surrounding a private label introducing a product to the food and beverage grocery space.
AMAZON LAUNCHES PRIVATE LABEL MILK & COCONUT WATER
- According to TJI research, Amazon has added private label dairy and beverage offerings to its grocery lineup, wherein the new dairy products, including a variety of milk, has been launched under its Happy Belly brand and a new coconut water product under its Solimo brand.
WHAT TRIGGERED THE LAUNCH:
- Amazon intends for expansion into its private label beverage segment. Hence, it has been continuing to launch private label milk along with previously launched 24 varieties of private label cheese under its Happy Belly brand and other numbers of beverage products under the brand including waters, teas, sports drinks, and “vitamin jellies”.
- Also, "Amazon’s performance with private label grocery brands has received mixed reviews, and its offerings up to this point have been fairly limited despite a lot of trial and error". Hence, this is also considered as a reason for the company to make deliberate efforts in making a mark in the private label dairy and beverage offerings to its grocery lineup.
- At present, Amazon new private-label coconut water will retail at $24.99 for a 24-pack of cartons at 11.2 ounces each and will be sold alongside coconut water national brands such as Vita Coco, Naked and O.N.E. (owned by PepsiCo).
- VITA COCO: Vita Coco is #1 best-selling coconut water brand on Amazon based on its popularity and sales. The product had gained 4-star rating from more than 3000+ reviews and is priced at $18 for Amazon prime members.
- The brand was launch back in 2003 in the US and has a strong market with a great fan following by superstars such as Madonna, Matthew McConaughey, and Rihanna.
- Amazon new Happy Belly milk and dairy items are lactose free (1%, 2%, whole milk, half & half) along with whipping cream and toppings and its competitive positioning says “If you like Lactaid, we invite you to try Happy Belly”, “If you like Reddi Wip, we invite you to try Happy Belly”.
- Amazon newly launched private label Happy Belly half-and-half milk has been positioned with the national brand such as Carnation, Land o' lakes, Organic Valley, and others.
- CARNATION by Nestle: Carnation by Nestle is a #1 Amazon best-seller in milk and cream, half-and-half category based on its popularity and sales wherein the product is 3-stars rated from more than 400+ reviews and priced for $11.99.
- Carnation by Nestle is a trusted heritage brand in the market for the past 100 years. It also has a gourmet brand which offers cakes, pies, milkshakes, and smoothies.
TYPICAL/LOGICAL POINT OF ENTRY:
- Through the launch of Solimo Coconut Water under its private-label expansion in the beverage category, Amazon intends to disrupt the US coconut water market which is estimated to be $2 billion per year. Also, the company intends to expand the Solimo brand into more beverage categories lately.
- "The Happy Belly brand milk and dairy products are the first non-whole foods private label milk and dairy offering from Amazon, according to TJI." By making it available to only customers of AmazonFresh, the company intends to strengthen its grocery beverage category.
- According to the report from Coresight Research, just 2% of Amazon’s private label offerings are in food and beverage, and through new milk and coconut water offerings, the company aims to provide a boost in private-label sales by selling beverages that are a go-to for many consumers.
TARGET LAUNCHES PRIVATE LABEL FOOD & GROCERY BRAND
- Target is making its largest foray into a private food label by launching a food and grocery brand Good & Gather which will have around 2,000 goods ranging from pasta and meat to milk and eggs. The products will not have artificial flavors, synthetic colors, artificial sweeteners or high fructose corn syrup.
WHAT TRIGGERED THE LAUNCH:
- Target intends to energize its grocery sales and aims to overtake the market share in the segment by launching the food and grocery brand Good & Gather wherein, "It’s also part of a broader effort to expand in house brands, such as the children’s clothing label Cat & Jack and men’s clothing brand Goodfellow & Co. By the end of 2019, Target will have more than 25 exclusive brands.
- Target said, "it expects Good & Gather will be a multibillion-dollar brand by 2020 and the largest of its private labels". Also, at present, nearly 75% of Target shoppers in stores are adding at least one food item to their baskets. It also offers one-stop-shop for its consumer needs which is its biggest strength.
- With the launch of Good & Gather grocery products, Target will be phasing out two food brands, Archer Farms and Simply Balanced. It will also scale down the number of items it sells under Market Pantry, which makes basic goods like sandwich bread, cooking oils, sauces, and canned vegetables.
- The national brands in comparison to which Target has launched its food and grocery brand Good & Gather include Frito-Lay chips, Chobani yogurt, and Cheerios cereal in snack category and others in grocery and beverage section.
- With the addition of Good & Gather to Target stores, it is also intended that the company will slightly increase the amount of shelf space it devotes to private-label products versus national ones eventually leading to increased penetration of Target 's store-owned brands in the grocery category.
- FRITO-LAY: National brands in the grocery segment of Target such as Frito-Lay in snack category are old well-established brands in the US which are in the market since 1932 and today, it is one of the favorite snack food company in America.
- CHOBANI: National award-winning brand Chobani offering yogurts through Target stores is a well-established brand since 2005 in the US and is America’s favorite Greek yogurt.
TYPICAL/LOGICAL POINT OF ENTRY:
- According to the Food Marketing Institute in partnership with IRI report, "Private brands in grocery stores are showing more momentum than manufacturer brands". Also, Target’s investment in a new private-label grocery brand is part of the wave has been an effort of the company to grow its grocery segment which is still a weaker foray of its offering giving only 20% to its business.
- "Target’s grocery business has had seven consecutive quarters of positive same-store sales growth, according to Lundquist, with six quarters of market share gains". At this moment, the company is trying to build the business momentum and make the most of its investment by launching the food and grocery brand and making a stronger penetration of store-owned brands in the grocery category.