What: Learning from US FMCG consumption during the lockdown.

Why it is important: although first insights tend to suggest that low price and unavailability of national brands were key drivers to increase consumption of private labels in groceries, McKinsey argues that they are key to win customer loyalty, but at the cost of a reset in the approach on how to develop a private label, at all levels. This echoes the current overhaul Galeries Lafayette is undergoing through a corporate reorganisation of their private label and a new approach in terms of product.

McKinsey reports that during the lockdown in the US, 38% of customers tried new brands, driven by 58% by the unavailability of their usual brand, and 21% by the value for money. 1 out of 5 grocery shopper bought more private-label products during the crisis than before. This can lead to thinking that such a shift is temporary, and might very well end once the crisis end, as low price is not a robust strategy. McKinsey argues that private labels in groceries can be a way to combine their original mission (lower cost, higher margin) with winning customers loyalty, provided the product value proposition is overhauled with regards to the rest of the assortment:

• This translates into carefully assessing and define the aspirations for the private label, with a sound strategy, assortment, and pricing.
• Most importantly, McKinsey mentions that communication, marketing, and packaging are of utmost importance since private labels redeployed in such a new way involve robust storytelling (note from IADS: in FMCG this is what Monoprix in France has done in a consistent way, mixing humour with product description on their packaging).
• Product development should not be cost-driven only anymore, but also include the consumer’s expectations (note from IADS: McKinsey is not mentioning in this article any sustainability tracking, however, these should be taken into account from the start by department stores)
• All of these changes are to be led by a new, made-to-measure organisation, tailor-made according to the level of development of the private label.

Turning private labels into powerhouse brands