As Canadian consumers face ongoing economic pressures, private label brands are gaining momentum in the retail and grocery sectors. According to Elliot Morris, Partner with EY Canada, the trend isn’t just growing—it’s accelerating faster in Canada than elsewhere globally.
“Private label is growing faster here in Canada than in other parts of the world,” said Morris in a recent interview. “There are twice as many people that are buying private label brands today in Canada than there were five years ago.”
He pointed to findings from EY’s latest Future Consumer Index, which surveyed 25,000 people globally. It revealed not only a spike in private label purchases but a strong level of retention among those who try them.
“About 40% of those who try private label don’t intend to return to brands,” said Morris. “So that just shows that there’s more willingness to try and then more willingness to stay with private label brands.”
Several factors are fueling the shift, including lingering inflation, supply chain disruptions during COVID-19, and ongoing concerns around pricing.
“There’s been persistent price pressure,” Morris said. “As we move into an era where there’s U.S. tariffs, or at least the threat of U.S. tariffs on products, it accentuates people’s willingness, desire, and perceived need to look for items beyond just price.”
Morris added that consumers are finding more value in attributes other than branding. “If brand has become relatively less important to people, other dimensions have become more important. Price first amongst them—but it’s also easy to find private label that has lots of other types of value and benefit beyond brand.”
While private label has long held sway in categories like fresh food, it’s now expanding into new territory. “When you think about beauty and cosmetics and personal care, and in some cases snacks and confectionary in particular, those are all places where private label are making big inroads,” Morris noted.
The implications for grocery retailers are significant. “The aisle is fundamentally changed,” said Morris. “Even within the grocery store, private label is becoming more front and centre especially in specific categories, and putting a bunch of pressure onto more traditional brands.”
Online, the pressure intensifies
“Through e-commerce private label continues to play more and more,” said Morris. “There’s an endless shelf, and one which consumers now feel more and more empowered to be able to search for themselves to find what they want.”
Traditional brands are under increasing threat from both private labels and challenger brands, and the risks are real. “If these companies don’t adapt, I fear that many traditional brands look to the recent history and believe that they have the muscle to be able to persist and win,” he said. “The challenge is that through each of those incidents, they’ve also decreased brand loyalty.”
He warned that many brands rely too heavily on old strategies. “The same old moves aren’t going to be able to keep you afloat,” he added. “A lot of the consumer products companies have to come up with new plays that enhance trust and also ensure that they’re able to continue to succeed.”
Innovation may no longer be enough
“More than 40% of consumers believe that the improvements that traditional brands are making through ‘innovation’ are really just dressed-up cost cutting measures in disguise,” Morris said. “A lot of the purchasing behaviour means that people are buying less as a result. So the returns to price changes are going down and down.”
Still, he sees opportunity on the horizon for brands that act quickly. “If consumer products companies can find ways to not only improve loyalty amongst their existing customers but go after new customers, I think that this is a big opportunity for them to be able to both grow share and continue to grow.”
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A forgotten aspect of the “shrinkflaton” phenomenon among national brands is that the consumer now needs to buy more units to get the equivalent amount of product. This means there is a significant environmental impact: more packages purchased means more waste if not recycled, plus the carbon footprint of additional units transported and sold. In this case, private labels may be more environmentally-friendly if they come in larger sizes. The fact that private label consumer products are generally cheaper on a per gram or per millilitre basis is the icing on the cake.