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    Features

    Private Labels Prove their Point

    Better performance, stronger marketing and improved packaging are redefining store brands

    Private Labels Prove their Point
    Private Labels Prove their Point
    In an effort to cater to parents’ need for safer ingredients, Walmart has launched the store brand, Hello Bello, with the help of celebrity parents Kristen Bell and Dax Shepard.
    Private Labels Prove their Point
    Amazon.com’s Earth and Eden brand, made by First Quality, is positioned similarly to the Honest Company diapers.
    Private Labels Prove their Point
    German retailer Aldi plans to expand its U.S. network to reach 2500 stores by 2022.
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    Karen McIntyre, Editor01.03.20
    In recent years, the private label market for disposable hygiene products has evolved from one offering consumers lower cost, and sometimes lower quality, products to one that not only offers the same bells and whistles as national brands but also caters to the evolving needs of today’s hygiene consumer.

    As quality efforts have ramped up in the private label market, retailers have also made significant efforts in terms of packaging, branding and marketing. These companies are responding not only to innovations from national brands but also from smaller, green-focused diaper brands that are catering to millennial parents.

    “Major retailers are responding to millennial parents with their own private label products,” says Pricie Hanna, of Price Hanna Consultants. “These diapers reach into the premium aspects that consumers want and satisfy the need for green diapers.”

    A good example of this was the February 2019 launch of Hello Bello, an expertly formulated plant-derived baby care line which was launched exclusively at Walmart stores. While Founded by celebrity parents Kristen Bell and Dax Shepard, the line is designed to give every parent access to high quality, better priced everyday essentials that are better for babies, budgets and the planet. While Walmart does not have a financial position with Hello Bello, it served as an exclusive launch partner with the brand.

    “As a mom of two, I know how beautifully messy parenthood can be, and that’s why we created Hello Bello—a line of premium, super-effective baby care products to take care of your kids from head-to-butt-to-toe,” says co-founder Bell. “Our products are fresh and fun. More importantly, we use plant-based ingredients and organic botanicals that are better for our kids and better for our world.”

    Hello Bello launched with 10 products across multiple SKUs, ranging in price from $1.88 to $23.94, with the majority under $8. They include diapers, wipes, shampoo and body wash, bubble bath, baby lotion, diaper rash cream, hand sanitizer, mineral sunscreen, bug spray and laundry detergent.

    “We know parenting is hard enough as it is,” shares co-founder Shepard. “Parents shouldn’t have to choose between what’s good for their baby and good for their budget. That’s why we couldn’t ask for a better exclusive retail partner than Walmart, who is making it possible for us to offer premium products at a non-premium price.”

    Over the last year, Walmart has expanded its baby assortment in addition to enhancing the shopping experience, which includes a remodeled baby department in more than 2000 stores and a new shopping destination on Walmart.com that helps parents shop curated nursery design styles.

    “We want to be a destination for parents to get everything they need for baby,” says Melody Richard, vice president of Baby at Walmart. “Hello Bello is a fantastic addition to our assortment, enabling us to offer a fun, exclusive and affordable option for parents who prefer products made with organic and plant-based ingredients.”

    Hello Bello premium diapers have a specially designed core with proprietary spherical absorbent technology that can absorb over 50 times its weight in fluid—allowing reduced waste (less material) while still providing serious leak protection. They offer a secure and comfy fit that’s breathable to promote good skin wellness, without the chlorine-processed fluff, artificial fragrances and lotions found in many other diapers. The brand launched with five adorable designs in-store and 13 online.

    Using a fragrance-free, hypoallergenic, over 99% water formula with aloe and chamomile, Hello Bello wipes are gentle and soothing on skin. And the thick, plant-based cloth makes them tough enough to help with whatever mess little ones throw at their parents (literally).

    “The old time situation when private label brands had to wait for a special feature to be launched by the big brands like Pampers or Huggies first before they could take the risk to clone them, is no longer true,” says diaper industry consultant Carlos Richer. “More amazingly what we are seeing today is the opposite situation, where these national brands are starting to follow the steps of private labels and copying their features and market strategies in order to protect themselves from declining market shares.”

    In the same vein, Target’s new baby care line, Cloud Island, features wipes that contain 99% water and plant-based ingredients including a coconut oil moisturizer. Its diapers offer 12-hour leak protection.

    “With all of Target’s new brands, we think about ways to expand upon the original idea,” says Mark Tritton, executive vice president and chief merchandising officer, Target. “As we talked about Cloud Island, the essentials category was always there. The idea was around better-for-you, dependable, affordable and accessible products that are good for your baby and your family. Now, building on the success we’ve seen with the brand over the past year, we’re bringing that idea to life.”

    These recent launches share a similar strategy to other natural-based private label launches like Amazon’s Earth and Eden brand, which were launched in 2018. Manufactured through an exclusive partnership with First Quality Baby Products, the baby care line is described as cruelty free, not tested on animals, made with certified sustainably sourced fluff and printed with non-toxic, water-based inks. In fact, the diapers appear to be similar to products sold by Jessica Alba’s Honest Company. The diapers also feature a printed band at the top of the product as well as a cotton blend dryness layer. They are free of natural latex rubber, chlorine and adhesives.

    Amazon’s entry into disposable diapers has not been without hiccups. The company first entered the market with the Elements brand in 2015. The initial launch, which was met with great fanfare, promised greater transparency in ingredient sourcing and manufacturing, but the company pulled the Irving Personal Care-made products off its site just a few weeks later following consumer dissatisfaction. The e-tailer re-entered the category in November 2018 through its Mama Bear private label brand.

    With one of the most sophisticated and effective subscription models in the retail world with its “Subscribe & Save” program where consumers receive discounts for the number of subscriptions they hold onto, Amazon has a competitive advantage over other companies in the private label front.

    Experts expect Amazon’s private label business to become increasingly popular in the coming years as voice control devices like Amazon Echo start directly suggesting consumers buy these brands. They are also set to have the ability to retain customers in the long run thanks to Amazon’s very sophisticated “Subscribe & Save” model.

    Outside of Amazon’s own brands, the e-retailer is also partnering with retailers to market their store brands. This year, Amazon extended its partnership with French retailer Casino and now has more than 3500 products on Amazon.com.

    The emergence of online sales channels, and their growing importance in the way that consumers make purchases, has led to the creating of a new private label. Not only have e-commerce sites, like Amazon.com, embarked on ambitious private label strategies, the internet has heralded the entry of many new entrants in the private label category that are being dubbed “the new private label.”

    These new companies, like Jessica Alba’s Honest Brand, Parasol or Made Of, are being made by contract manufacturers to fit a very specific branding or marketing strategy and finding success with online marketing and subscription models which play to the cyclical nature of the hygiene market.

    By the Numbers
    According to market tracker Euromonitor, products in the tissue and hygiene markets have held a higher share of private label sales historically than other consumer areas like packaged food, home care and personal care. This high private label share can be attributed to the commodization of the market. Consumers consider tissue and hygiene products as commodities and tend not to distinguish private label items from branded products in terms of attributes.

    However, as private label companies and their retail customers develop lines not only with more improved features but with stronger marketing messages, private label sales are strengthening. Product lines like Walmart’s Hello Bello and Target’s Cloud Island, in fact, reflect a trend for lifestyle-based segmentation. These products are catering to the needs of millennial parents who are more concerned about the ingredients found in baby care products.

    Western Europe continues to lead retail value sales of private label products, according to Euromonitor. The region accounted for 49% of total value sales in 2018, down from 51% in 2013 and slow growth can only be explained by high penetration levels for private label and the maturity of the market in general, especially when compared to Eastern Europe or the Middle East and Africa. In this markets, changing economic conditions, combined with lower levels of penetration, enabled private label to grow strongly.

    The magnitude of Western Europe’s private label market can be attributed to the fact that it is the part of the world where discounters have the strongest presence. Germany’s Aldi and Lidl dominate and continue to expand thanks to low prices and good quality offerings, and both of these retailers are boosting their presence in Spain and the U.K. Meanwhile, in Belgium, Action is expanding its store network and increasing its range of tissue and hygiene products, resulting in intensified competition.

    North America was the second largest region for private label sales, accounting for 35% of value sales. This high percentage is related to strong investment in research and development leading to better offerings and more innovative product lines which have allowed major retailers to match the fit and performance of leading brands.

    As traditional North American retailers like Target, Walmart and Costco continue to improve their private label offerings, the region is also seeing increased interest from successful European stores like Aldi which plans to expand its network in the U.S. to 2500 stores by 2022. Its Little Journey store brand, which claim to be free from formaldehyde, parabens, phthalates and triclosan, positions it well with more ingredient conscious consumers.

    At the same time, Lidl is committed to opening stores on the east coast of the U.S. and should have more than 100 stores in the U.S. by the end of this year.

    The largest increases are occurring in Eastern Europe where private label accounted for 17% of category value in 2018. Poland is the country where share is highest at 38% and Russia and Slovenia saw the biggest share increases. Increases in Russia can be attributed to difficult economic conditions, leading price conscious consumers to look for cheaper alternatives. Growth in Slovenia was mostly due to substantial investment in product development and distribution.

    According to Polish wipes maker EcoWipes, private labels have been successful because of their ability to react more quickly and offer a wider diversity of products. “Chains no longer position their products as a cheaper alternative for brands, but as exclusive brands available only on their shelves,” says Marta Jabłonska-Kubow, product marketing manager, EcoWipes. “Private labels are faster in adaptation to new regulations (e.g. SUP directive) and market demands (eco-awareness). This is why private labels focus more on sustainable and biodegradable products, and are capable of introducing such products at a much faster pace than brands, which with their market position, prefer to slowly evolve than to revolutionize.”

    The wipes market, especially in private label, is witnessing strong demand for natural wipes, she says, adding that EcoWipes is one of the few companies in Europe ready to globally switch to fully biodegradable offerings. In fact, the company aims to cease production of polyester-based wipes in 2020. “We have the capacity not only to replace but to increase our production of natural, high performance products,” she concludes.

    Meanwhile, the Asia-Pacific region saw its share decline between 2013 and 2018. Hong Kong saw the biggest decline as consumers traded up to premium options while Chinese consumers continue to be influenced by strong branding and value added innovations. However, there are indications that Chinese consumers are starting to value lower cost products.
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