Walmart's Private Label Blitz: A New Era In The Private Label Showdown

Walmart fired a huge blast in the private label wars, rolling out a new private label after building what had already become among the world's biggest such brands. Competitors such as Great Value and other brands are getting company in Walmart aisles, which marks a huge, if only the latest, bet on private label.

The Bentonville, Ark.-based giant just launched its “bettergoods” private label, which it’s billing as its “largest private brand food launch in 20 years” with 300 items, from $2 to $15, primarily under $5, including frozen, dairy, snacks, beverages, pasta, soups, coffee, chocolate and more. The company is dividing the products into the categories of "culinary experiences," "plant-based," and "made without," reflecting retail trends.

Rather than a gradual rollout, it’s a big shift at once. Shoppers will find restaurant-style chicken wings, Greek yogurt flavored with strawberries and cream, plant-based almond milk, pistachio nut butter, single-origin Colombian coffee, plant-based mozzarella, organic reduced-fat chocolate milk, salsa, and much more. It's just the latest example of how companies are going private – at least with private label.

In addition to Walmart, Amazon, and many other retailers have been pumping up private labels in an epic battle of the brands. Amazon sought to analyze Trader Joe's top 200 brands to launch its Wickedly Prime private label to win market share. Executives hired a former Trader Joe's executive as they sought insight into their competitor.

One thing these days, however, is anything but a trade secret: Private label sales are soaring as the private label revolution spreads, fueled by loyalty, the very thing that used to boost brands, quality, and price.

Trader Joe's, which reportedly relies on at least 85 percent of sales from its private label, is becoming a retail role model, with others following suit, each with their own strategy. Companies relying heavily on private label include Aldi, as Target, Walmart, and Amazon build massive brands.

While some may be surprised by the sea change, not all are. Oisin Hanrahan, CEO Of Keychain, a platform that matches manufacturers with retailers eager for private label, has been touting private label perks. I spoke with him just days before the Walmart launch to get his views on private label, and how his company is involved in a tide sweeping over retail.

While Walmart and some of its biggest competitors may rule the roost, other smaller

companies are seeking to go this route. Keychain provides data on manufacturers, including contract manufacturing, potentially matching them to launch private labels. Oisin believes all retailers will pivot to the Trader Joe’s model over the next five years, and new rollouts confirm his views.

As he sees it, the marketplace has changed over the last 20 years from driving margin to driving loyalty. Trader Joe’s created cult-like loyalty, which is why many companies want to emulate their success. Amazon, which acquired Whole Foods in 2017, has been taking a page from Trader Joe’s, but with its own approach. CNBC said Target indicated 12 of its 48 “owned brands” are worth at least $1 billion each.

Alpha-Diver Consultants' latest Snack50 Report ranked private labels as the top six brands based on psychological factors. Walmart’s Great Value already topped the list, followed by Aldi, Aplenty, Favorite Day, Happy Belly, and Good and Gather.

Bettergoods’ prices are clearly part of the positioning. Alpha-Diver found “consumer price concern” up 30% from pre-pandemic levels and 12% in the past year.

Companies sometimes brand lines with their name, and at other times, they build their identity distinctly. Walmart and Sam’s Club offer brands such as Great Value, Member’s Mark, Marketside, Freshness Guaranteed, Ol' Roy, Parents Choice, and more. Amazon sells Amazon Collection jewelry, Amazon Essentials clothing, AmazonBasics products such as batteries, as well as Happy Belly snacks. You might not know that Solimo home products, as well as Lark & Ro and Goodthreads clothing lines are also Amazon brands.

The launch of numerous labels enables companies to introduce various product lines with diverse pricing, appeal, and prestige, and expand their market share. Walmart is seeking to carve out new territory with bettergoods.

Many obstacles, such as quality concerns, have all but been obliterated. There is growing evidence that private label products are as good, if not better, than many large, branded products. There's also growing evidence that private label units sold will outnumber branded products very soon, and private label snacking is exploding.

DataWeave in 2022 reported that inflation was accelerating private label share and penetration, with about one-fifth of grocery SKUs as private label at Whole Foods and Target and about 16.3 percent at Walmart Grocery. Private label also may be a big winner when it comes to inflation, fueling launches such as bettergoods.

By creating a loyalty factor, companies give consumers only one alternative: to go to that retailer for that product. Companies can then transfer marketing spend into product costs to help increase margins and hold prices down, a win-win.

However, creating a new private label product is not easy for the manufacturer or the brand, even if Walmart has a huge infrastructure and relationships. We get many inquiries about who has the capability (and interest) to manufacture new products. Similarly, manufacturers often want new products to keep the wheels turning. Enter Keychain.

While secrecy still swathes private label, Keychain is an app that matches products with manufacturers that could fuel more private label. It boasts 24,000 manufacturers and nearly one million SKUs after just launching in February of 2024.

Oisin told me that starting Keychain isn't his first rodeo after successfully running and selling several companies. He and his partners have worked together in the past, and developing Keychain "feels very comfortable, like putting your foot into an old shoe." He launched this platform for the packaged goods industry with $18 million in VC-backed seed funding. Retailers aren’t the only ones interested in private label; so are investors.

As a firm believer in private label and the recent cloak-and-dagger antics of mirroring brands and strategies, I found the vision of Keychain to be important for evolving brands and the future of private label. Moreover, it fits directly into AI. Walmart and Amazon have tons of data, but others also can get data.

Let's say you have a product, but don't know where to manufacture it. Who are the best manufacturers for that type of product in the United States? Keychain gives options and data without the cloak and dagger. Furthermore, depending on the ingredients and processes, you can refine the search using AI. Keychain provides that answer.

Manufacturers lament that a broker network is the only way to get their products into the marketplace. They can reduce broker fees and utilize those savings to create better margins by developing private label products that lure consumers into a retail environment.

I'm also a big believer in direct-to-consumer (DTC), but Oisin isn’t as bullish on that idea. Everyone is emulating everyone with Trader Joe’s now offering Trader Joe’s Pronto, emulating guess who? Retailers are rolling out new private labels. How do distributors fit into this picture? One distributor told me that they are really glorified box movers. Will they be able to survive these trends, and how?

When advising clients on co-packers, small runs are always an issue, and new products are often put on the "back burner." Keychain is the first in-depth app that gives a brand choice of manufacturers with detailed information on the manufacturer, their processes and products, size, and other factors, including ingredients.

Private label isn’t booming in all categories. Nearly a quarter of U.S. grocery SKUs are private label in bakery, desserts, and deli, compared to about 10 percent for snacks and baby items and only 7.5 percent for beauty and personal care, according to DataWeave. Retailers are launching specialty private label brands, with Safeway offering the O Organics brand and Kroger's offering Comforts baby products, while bettergoods includes a plant-based component.

With 763,224 products, 24,027 manufacturers, and $128,456,786 in manufacturing, Keychain may help match and make new brands, but cloak and dagger will likely continue. And so will the guessing game as to who makes what for whom. You may try to figure out who is manufacturing Walmart’s bettergoods products. In the end, consumers trust the retailer to leverage its influence to benefit them. In the meantime, platforms like Keychain may take some of the mystery out of the process for retailers and manufacturers, helping create more matches consummated in grocery store aisles.