Private Label Beverages: Meaning and Manufacturing

Today's retailers are innovating more than ever to thrive and grow in a highly competitive market. One growing trend among them is the use of private labels — goods that retailers develop and sell with the help of external manufacturers — to build brand loyalty and increase profitability.

Understanding the private label brand strategy, how retailers are leveraging it, and its impact on new and existing beverage brands will help you devise a more successful and effective retail presence for your beverage brand.

What Is a Private Label Brand?

A private label brand is the overarching brand that a retailer applies to its private label products, including design, name, logo and messaging. It represents the identity and marketing strategy behind a retailer's exclusive product line.

Retailers often have multiple private label brands to cater to different consumer segments, product categories and market trends. This strategy allows them to develop private label brands that offer distinct value propositions that help differentiate them from both national brands and other store brands and reach a wider audience.

Examples of Private Label Beverages

Some examples of businesses selling private label or store brand beverages include:

• Walmart: Walmart launched its private label brand "bettergoods" in April 2024. This brand includes a line of quality beverages sold at affordable prices. The retailer also offers sodas and sports drinks under its other private label brands, Great Value and Sam's.
• Trader Joe's: The grocery chain sells many private label products in-store under the "Trader Joe's" brand, including sparkling water and uniquely flavored fruit juices.
• Kroger: The retailer sells multiple affordable beverages at different price points under its store brands, which include Kroger, Smart Way and Private Selection.
• Amazon: Online retailer Amazon offers private label beverages under several house brands, such as Happy Belly and Amazon Fresh.

The State of the Private Label Market

The private label market has experienced significant growth globally, driven by consumer demand for value and quality, economic pressures and strategic investments by retailers. As inflation soared, consumer demand for affordable store brands rose, capturing almost one in five U.S. consumer products sold. Between 2019 and 2023, private label food and beverage sales grew by over $45 billion in the U.S.

The total U.S. private label market is now worth $236 billion, with private labels accounting for nearly 21% of the consumer goods market volume. Categories with the highest private label share include refrigerated, general merchandise, health and frozen — private labels make up 10% of total beverage sales.

The Future of Private Label Beverage Manufacturing

As consumer demands have evolved, retailers have adapted their private label strategies accordingly. They are shifting toward premium and sustainable private label offerings, incorporating organic, plant-based and eco-friendly products. This premiumization strategy helps retailers compete directly with national brands in terms of quality and innovation.

Overall, the private label market is transitioning from being a budget-friendly alternative to a mainstream category that emphasizes quality, innovation and sustainability. Consumers are increasingly opting for private labels due to their perceived quality and affordability. Experts predict that beverage sales will increase at a compound annual growth rate of 10.66% over the next five years, reaching around $187 billion by 2029.

As with every area of uncertainty, the opportunity will go to those who understand the customer best and can deliver superior products and experiences at the right price and profit margin. The game is constantly changing, and knowing the motivation and moves of each player remains your best strategy for success.

The Benefits of Private Label Manufacturing

Private label manufacturing is an advantageous solution for retailers looking to launch beverage brands. Private label services allow them to:

• Differentiate their brand: Private label brands allow retailers to offer unique products that customers can't find in other stores. This helps differentiate them from competitors and builds customer loyalty.
• Enjoy higher profit margins: Private label products offer higher profit margins than national brands due to lower manufacturing and marketing costs. With greater control over pricing strategies, retailers can optimize profitability while maintaining competitive prices. Unlike national brands, private label products also typically require minimal marketing investment. Retailers can leverage their existing store traffic and loyal customer base to drive sales, reducing reliance on costly advertising campaigns.
• Stay competitive: Retailers can position their private label products as budget-friendly, high-quality alternatives to regional, national or international brands, helping them stay competitive through cost savings. At the same time, some retailers use premium-positioned private label brands to compete directly with established national brands. With lower production and marketing costs, private label products can be priced more affordably, appealing to budget-conscious consumers while maintaining strong margins.
• Build loyalty: Retailers use store brands to offer exclusive, affordable products under the store's name. This strategy helps retailers build relationships with their customer base and increase brand loyalty.

Types of Store Brand Manufacturers

Retailers generally rely on four types of manufacturers for their store brand products:

• Large national brand manufacturers that use excess production capacity to supply private labels
• Small manufacturers specializing in specific product lines
• Regional manufacturers producing private label products for targeted markets
• Retailers and wholesalers that use their own operations to manufacture store brand products for their stores

What Makes a Private Label Successful?

Like all products, private label products must address a specific target market and meet their needs. Successful store brands typically share the following traits.

1. Brand Alignment

Consumers are increasingly trusting retailers to deliver their customer experience. As such, they expect the store brands to represent the same level of quality and similar attributes to the store's core brand. Retailers who sell store brands that align with their parent brand can better meet these consumer expectations.

For example, Trader Joe's prioritizes offering quality products to consumers at everyday prices. To ensure their store brand products align with their values, they rigorously control quality and avoid ingredients like high fructose corn syrup, genetically modified organisms (GMOs), hydrogenated oils, MSG, and artificial colors, flavors and preservatives.

2. Differentiation and Value

As with national brands, private label brands perform best when they add something unique to the market or address an unmet need. Retailers who understand consumer needs and competitive offerings can successfully differentiate their products through taste, quality and branding. However, price and value remain the primary reasons why consumers buy private label products.

A recent comparison of store brand prices versus their name brand counterparts in Florida showed considerable savings for consumers. Those who shop Walmart and the popular supermarket chain Publix could save 40% or more by choosing private label goods.

3. Product Strategy

Retailers can use private label in many ways, but they must be clear and organized in their approach. Companies must understand the different segments their products appeal to, how their brands are perceived and how each product aligns with the core brand. A successful private label uses a research-backed strategy to appeal to its target customers.

4. Distinct Visual Identity

While multiple factors influence a consumer, research shows that product packaging and visuals can significantly affect purchasing decisions. Consumers are also more likely to remember brands through visuals than verbal communication, and product packaging is the perfect vehicle for brand visuals.

Private label brands must use appealing packaging designs that attract and engage their target audience, grab consumer attention, differentiate products and deliver a clear brand proposition. Whether or not the design represents the retailer's overall brand, private label packaging must effectively compete with established national brands.

Develop Private Label Beverages With BevSource, the Beverage Industry Expert

At BevSource, we support businesses in developing, sourcing and producing successful beverages. Whether you want to sell alcoholic beverages, RTD coffee, functional beverages, sports drinks or another product, we have the experience, industry insights and capabilities to partner with you at every step.

We understand that every beverage brand is unique, which is why we offer personalized beverage consulting solutions. Come to us for help sourcing one ingredient or take advantage of our full capabilities. If you want to outsource your manufacturing, we can coordinate that, too. We have the largest network of qualified manufacturers in the U.S., and our experts will collaborate with you to find the right manufacturing partner.

Learn more about our range of services and request a consultation with a beverage expert to get started. Together, we can turn your beverage goals into reality.