MDD - PRIVATE LABEL

Definition

Private label, or PL, refers to products sold under a brand owned by the retailer, as opposed to national brands manufactured and marketed by independent manufacturers. Private label products cover a wide range: low-end, low-price items; mid-range products positioned as alternatives to national brands; premium private label products with a focus on quality; and specialty private label products (gluten-free, vegan). In 2024, private label products accounted for approximately 35% of food sales in France.

Why it's important

• Offer distributors a higher margin —compared to national brands (on average, +10 to +15 points)—thanks to the absence of marketing intermediaries.
• Provide consumers with a price benchmark: more affordable than national brands, often with comparable quality.
• Building a brand relationship: between the retailer and the customer: a successful private label builds customer loyalty and sets the retailer apart.

A concrete example

A grocery chain is launching a premium private-label chocolate line priced at €4.90 per bar, compared to €6.90 for the equivalent national market leader. The private-label product’s cost of goods sold is €1.80, compared to an estimated purchase cost of €4.20 for the market leader. The unit margin rises from €2.70 for the market leader to €3.10 for the private label, a 15% increase. Over 18 months, the private label captures 22% of the category’s volume without completely cannibalizing the market leader (which retains 38% of the market thanks to its brand recognition).

How to measure/use it

Developing an effective private-label pricing strategy requires clearly positioning the private label relative to national brands (target price differential, advertised quality level), defining a product line architecture (how many private-label tiers: entry-level, core, premium), and continuously monitoring the competitive position against both national brands and the private labels of competing retailers. Analytics tools horizontally link private label prices to those of equivalent national brands.

Common Mistakes

• Maximizing the price gap between private-label and national-brand products: a price gap that is too wide raises suspicions of lower quality, which hinders adoption.
• Underinvesting in the quality of private-label products: A private-label product perceived as mediocre erodes trust and hinders future sales.
• Expanding the number of private-label products: without a consistent product lineup—having 8 different private-label brands under the same retailer’s banner—confuses customers.

Learn more

• Research & Data: Price analysis to assess the price gap between private-label and national brands by category.
• Solutions: Pricing Analytics and Product Matching to Drive Private Label Positioning.
• Tip: Developing a pricing strategy specifically for private-label products.
• Resources: See our pricing FAQ for MDD margin standards by category.

Mini FAQ

What percentage of a product lineup should be made up of private-label products?

This varies by retailer. In the food sector in France: between 25% (traditional Carrefour) and 95% (Lidl). The appropriate level depends on the retailer’s positioning and the identity that the private label is intended to convey.

Private Label vs. Own Brand: What's the Difference?

There is no distinction in everyday French; the two terms are synonymous. The term “own brand” is sometimes used when the brand name does not include the retailer’s name (e.g., Reflets de France for Carrefour), and “private label” is used when it does (e.g., Carrefour Bio).

How should you respond if the national brand lowers its price?

Depending on the target spread, one can either lower the private label price to maintain the spread or allow the spread to narrow to preserve the private label margin. The decision depends on the elasticity of the private label and the retailer’s strategy.