ConAgra Foods, one of the largest food producers in the United States, just acquired Ralcorp Holdings for $4.95 billion, making it the largest private-label food manufacturer in the United States.
According to the Wall Street Journal, consumption of private-label food reached a peak in February 2011 at 29 percent of the market, but has slipped down to 28 percent since then. In addition, store-brand food labels have increased since 2008, rising from 18 percent to 22 percent.
This may be because store-brand producers such as Whole Foods, Trader Joe’s and Costco are becoming more “sophisticated” with their ingredients as well as taking in a larger profit on store-brand products than private-labels. Furthermore, the source stated that by developing store-brand labels, companies are able to develop customer loyalty and differentiate themselves from competitors more easily.
“The national brands are not going to roll over,” Harry Balzer, chief food industry analyst for research firm NPD Group, told the Journal. “They are responding with their move to everyday low pricing.”
Which is why ConAgra’s purchase of Ralcorp is critical as it quadruples the size of the private label food industry and makes the company the second-largest packaged-food company behind Kraft.
Regardless of the how ConAgra’s acquirement of Ralcorp may affect the industry, store-brand products will continue to be profitable for retailers and grocers. This is especially true if companies can use custom labels as a way to market themselves toward the local economy better than major brands. By investing in a Primera LX900 color label printer, companies will be able to produce the high-quality labels needed to do so.