Although brands account for the majority of volume with most types, private label permeates virtually every beverage category in the United States. Private label beverages, also known as store or home brands, can now be found in the largest and the smallest of beverage categories. Although carbonated soft drinks remain popular, as the market has evolved and consumer tastes have shifted, retailers in private label have moved into more non-carbonated products, like bottled water and fruit beverages, as chronicled in the latest edition of Beverage Marketing Corporation’s ‘Private Label Beverages and Contract Packing in the U.S.’ report.

Carbonated soft drinks, milk, bottled water and fruit beverages are considered prime categories for private label.

Branded products like Coke, Pepsi and Dr Pepper dominate but the vast size of the carbonated soft drink category has created an opportunity for private label brands, which are typically purchased by value-conscious consumers. For the most part, the branded company leaders have done an effective job at blunting further inroads of private label through strong marketing of their products, gaining widespread distribution, and pricing their products so that they can be afforded by a mass market. Historically, private label has always played a roll in the industry but its share of the market has been stagnant over the last decade. Since 1993, private label has ranged from a 4.8% share on the low side to 7.4% on the high side. In 1997, private label accounted for 5.0% of CSD volume. A decade later, it accounted for 6.6%.

The milk category has the most developed private label business and the largest. In 2007, private label account for more than 62% of U.S. fluid milk sales. Milk is the only category with more than half of its sales in private label. The greatest amount of private label milk sales are in no-/low-fat milk and whole milk. A small amount of private label sales are in flavoured milks and milkshakes.

A similar situation is noticeable in Australia, with milk the most popular private label product. Dairy Australia statistics suggest private label now has a 55% share of supermarket milk volumes, up from just 25% in 99/00. This is primarily due to their dominant share of the whole milk category.

The reason for consumers’ greater interest in milk over other beverages can be linked to a comparative lack of differentiation. There is brand differentiation between milk products on Australian shelves but not to the same degree as carbonated soft drinks and energy drinks. As a result, consumers have become more interested in private label as they look to reduce their shopping bills.

The strength of brands like Coca-Cola, Pepsi, V, Red Bull and Schweppes ensure that retailers struggle to gain a strong foothold in the lucrative carbonated and energy drink sectors. Additionally, the higher market share of flavoured milk brands compared to whole milk highlights that any product category where companies have to concoct their own formulas to create a unique taste, offers an advantage to national brands over private label.

While consumers may not be as brand loyal with bottled water as they are with some other categories, there are a wide number of branded waters that are experiencing solid success in the market. The success of brands varies by water type. Waters that often serve as substitutes for tap water, such as so-called retail bulk water in large packages, tend to have the greatest amount of private label. In 2007, 42.5% of retail bulk water sales in supermarkets were private label.

Once again, it is a product that lacks great taste differentiation that offers solid returns for retailers. The branded leaders in the category have managed to withstand private label by strong brand management, which, in the bottled water sector, often revolves around packaging that stands out and a promotional focus on the purity of their product. It is also notable that, like milk, branded products have great strength in the flavoured water sector.

Private label is also solidly represented in fruit beverages within the United States. The category is more fragmented than other established categories – thus providing an opportunity for private label because consumers may be less brand-loyal. In 2007, 14.4% of shelf-stable fruit beverage sales in supermarkets were accounted for by private label.

While non-alcoholic categories dominate the private label landscape, there is some, limited private label alcohol business. Beer, wine and distilled spirits have minimal private label sales and show little sign of having that change anytime soon. While ‘brands’ reign supreme in most of the non-alcoholic categories, brands are even more in demand in the alcoholic categories. Private label wine shows perhaps the most promise although it remains a small business.

In Australia, Woolworths has recently sought to grab a slice of the $7 billion beer industry with the introduction of their first private label beer, Platinum Blonde. Private label alcohol is not prominent on Australian shelves but, if Woolworths manage to make inroads with the Platinum Blonde product, expect many more in the future. Once again the strength and popularity of brands in the alcohol industry has managed to shield the sector from private labels, and inroads from retailers are unlikely to be swift.

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