The private label potential for functional foods

By Lorraine Heller

- Last updated on GMT

Private label will become a major avenue of opportunity for innovative functional products, which could make their mainstream debut via this “historically unlikely source”, according to a firm specializing in functional food development.

TandemRain Innovations told NutraIngredients-USA.com that national retailers could be looking to innovate functional products under their own private labels, in an attempt to avoid the long lead times of product innovation from the national brands.

“National retailers could leverage their relationship with the consumer to partner with external innovation companies that can provide them with functional finished products – formulated, packaged and shelf-ready – the most innovative of these firms will be able to produce a shelf-ready product in four to six months,”​ said TandemRain Innovations president Tony Keller.

Another opportunity that Keller highlighted was that national brands could diversify their innovation process for the development of formulated, packaged and shelf-ready goods.

This could be pursued in a manner that compliments their internal process, but allows for rapid external innovation of functional finished products, he said.

“National brands that want to lessen the impact of private label competition will create these functional products with either patented technology and/or exclusivity of the active ingredients.”

Strong sales

Keller’s predictions that 2009 will see a private label focus appear to be in line with a recent analysis by the Private Label Manufacturers Association (PLMA).

President of PLMA, Brian Sharoff, last month said the current economic downturn in the US is leading to strong sales and increases for store brand products.

He said an analysis of the past three US recessions indicates that store brands make sales gains during times of economic weakness, but cautioned that high quality standards need to be maintained in order to ensure success.

In the 2001-2003 recession, private label’s unit market share climbed from 20 percent to 21.8 percent, according to the PLMA. And in the 1990-1991 recession, unit share for retailer brands moved up from 17.6 percent to 20 percent.

Positive perception

Private label products are viewed positively by the majority of US consumers, according to a new survey by The Nielsen Company, and an improved sense of quality is considered the likely driver.

It found that 63 percent of consumers believe private label brand quality is as good as name brands and 33 percent consider some store brands of higher quality than name brands.

Meanwhile 62 percent of consumers report they consider store brands to be as good as name brands, up three points since 2005.

Private label products are currently estimated to account for more than $81bn in the US, up 10.2 percent over the past year.

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