Private label products are hot. The number of retailers reporting that at least half their merchandise involves their own label has increased from 42 percent to 55 percent since 2008, according to Retail Systems Research, a Miami-based company that provides information on business and technology challenges for retailers. "Folks who were reluctant a year ago are now saying, 'We are ready to stir it up and do a private label program in the natural, organic world,'" says Kim Greenfeld, founder of Campo Verde Solutions, a Boston-based natural and organic food-industry consulting firm focusing on private label programs. "It's definitely because of the economy. Customers are now realizing that national brands have been taking them for a ride and that private labels are not the generics of yore, but instead as high in quality as national brands, if not more so."
What's next: Experts predict private label products' market share will increase by 2012, which means there's potential for natural retailers looking to join the action—as long as they know what they're getting themselves into. "The major challenge is the volume," Greenfeld says. "In order to cost-effectively and efficiently distribute products, you need to make sure you have decent volume. If you have a chain of 20-plus stores in the same geographic region, you really could and should be private labeling. If you have 50 stores all over the country, you will be spending a lot of money on distribution, and won't be able to fill up trucks as easily."
What this means for retail: If private labels sound right for your operation, start by either contacting private label manufacturers yourself or reaching out to a consultant who can help connect you with the right manufacturers. Then get ready to launch your program around big sellers—think frozen veggies, fruit, basic commodities and staples, Greenfeld suggests. Another option she recommends is a private label growth hormone–free dairy program. "You want to build momentum and get people excited about high quality and lower price," she says. "And if you are already doing private label, now is the time to value-add and supersize it."