They’re an underdeveloped opportunity for contract packaging, Ron McPhee, a partner at Retail Marketing Partners, told the Contract Packaging Association’s annual meeting via a videoconference.
Just how big is the opportunity in private label? Following are several figures that McPhee cited:
Private-label share in the U.S. will grow from 17% of total market share to 25% over the next few years, driven by store-brand products with national brand-equivalent quality, and with up to 50% less of the sales and marketing overhead associated with national brands.
Private-label share of processed foods alone will reach $60 billion to $70 billion of the $350 billion U.S. food market.
Private-label product marketers, McPhee asserted, will need to lean more heavily on contract packagers’ knowledge, flexible operations, and contacts to provide short runs and modify products in response to changing consumer demands.
Contract packagers can gain private-label business, McPhee said, if they define and market their proven capabilities and assess retail categories that match their capabilities. Then they should find the best entry point, identify gaps in the market, find and sell a solid prospect, and use that success to capture metrics to measure success. After that, they should expand their offerings to another customer in a noncompeting category.