The fast-moving consumer goods (FMCG) industry is going through a major transformation with unprecedented price increases and significant volume declines over recent years. Private labels — once relegated to budget-conscious shoppers — are now capturing a broad spectrum of consumers. Economic pressures and an increasing demand for value have collectively propelled private labels to their highest market share. They are reshaping purchasing habits, rewriting the rules of brand loyalty, and pushing more national brands into the premium part of the market.
From 2020 to 2024, private label products surged across nearly every category, particularly in Western Europe and North America, with essential, low-emotional categories like hygiene, core food, pet food, and home care being most impacted. Shoppers are embracing private labels not just for their price tags but also for their quality, which increasingly rivals established brands. When not switching to private labels, price-sensitive consumers often reduce their consumption; this has been an even bigger hit to FMCG players in recent years than the market share growth of private labels.
This tectonic shift in consumer behavior is challenging traditional FMCG brands to rethink how they connect with customers, offering them a pivotal moment to recalibrate strategies, reinvigorate brand value, invest more in innovation, and redefine their role in a competitive landscape. For FMCG leaders, adapting to this new reality isn’t just an option; it’s a vital step in staying relevant — and thriving — in a transformed marketplace.
Why consumers choose private labels
The growing appeal of private labels stems from several intertwined factors. Primarily, consumers appreciate the price-value equation they deliver. But private labels, which historically occupied the lower-price segment, have expanded into new tiers, encompassing mid- and high-quality products with increased focus on taste and ingredient quality. Winning back consumers who have switched to private labels will therefore be a major challenge.
Recent Oliver Wyman research in Western Europe indicates that in France, nearly 80% of private label consumers are drawn to these products not just for affordability but for their perceived equivalence in quality and/or taste to national brands. In Germany, satisfaction is even higher, with 89% of consumers choosing private labels for quality as well as cost-effectiveness. As economic challenges persist and inflation impacts household budgets, private labels meet a growing need for affordable options without significant trade-offs in quality.
How FMCG brands can stay competitive
After years of focusing on increasing product value, FMCG leaders now critically need to drive incremental category growth in volume and stop losing consumers to private labels or reduced consumption. In our experience, this requires turning back to some RGM basics that have been less emphasized in recent years of “easy” value growth:
1. Fundamental review of price pack architectures (PPA)
Price sensitivity is a fixture of today’s market, and adapting price pack architecture is key to winning consumers over, avoiding the extremes of premiumization, and a race to the bottom against private labels. Through a structured, fundamental review of product sizes, price points, and packaging options, brands can better target consumers and serve their diverse needs and budgets. Thoughtfully adjusted PPA not only keeps pricing competitive but also respects consumers’ value expectations.
2. Enhanced control over trade spend ROI for more effective promotional strategies
With more consumer data at their fingertips, brands can design promotions that are as precise as they are persuasive. Rather than broad discounts, brands can now focus on targeted, data-informed promotions that actually recruit new consumers and drive repeat purchases. This strategy goes beyond immediate sales boosts — by analyzing the full impact of promotions, including customer acquisition and long-term value, brands can refine their investment to maximize both short- and long-term growth. It’s about connecting with consumers in meaningful ways, not just offering a quick deal.
3. Better commercial leverage of sustainability achievements and strategies
Sustainability has moved from a nice-to-have to a must-have for many consumers. Brands that lead with sustainability initiatives, from eco-friendly packaging to ethical sourcing, are more likely to foster loyalty. That said, the key is balancing these changes with affordability. Consumers are increasingly supportive of sustainable brands, but they are not ready to pay for green options. Transparent communication and realistic pricing help ensure that sustainability efforts strengthen brand loyalty and brand value without alienating budget-conscious shoppers. For example, Ritter Sport recently shared with us how it has successfully translated its sustainability efforts into commercial improvements.
4. Improving and speeding up innovation in product development
Finally, brands also need more impactful innovations — not just renovations or extensions of existing products, but ones that add value and better respond to real needs. Fast-paced product development has also become a game-changer. Agile FMCG brands are setting themselves apart by rolling out products that appeal to evolving tastes, whether through new flavors, unique packaging, or limited-edition items, and which offer superior experience on all dimensions. With tools like social listening and artificial intelligence (AI), brands can react swiftly to trends, bringing new products to market faster than ever. This approach positions them as adaptable and consumer-focused, contrasting with private labels that may lack the agility to innovate at this pace.
By strategically blending these approaches, FMCG brands — both category captains and challengers — can carve out a unique space in a tough competitive landscape, standing apart from private labels and deepening their connection with today’s value-driven consumers.
How FMCG brands are adapting to compete with private labels
To meet the growing private label challenge, several FMCG brands have refreshed their approaches, focusing on what makes them unique. By highlighting qualities like regional sourcing, premium ingredients, or innovative packaging, these brands are creating a narrative that resonates with consumers on a deeper level. For example, one multinational confectionery brand recently strengthened its sustainability commitment by introducing fully recyclable packaging — a move that not only aligns with environmental priorities but also attracts a younger, eco-conscious demographic.
Others have leaned into an omnichannel marketing approach, using social media and e-commerce to build direct relationships with consumers. Digital campaigns, featuring influencers and user-generated content, are enhancing engagement and loyalty by fostering a more interactive brand experience. This strategy broadens their reach, attracting new customers and offering a cost-effective alternative to compete with private labels in both visibility and consumer appeal.
Charting a new course for FMCG brands to stay ahead
As FMCG brands continue to adapt to a market shaped by volume declines and private label growth, they can benefit from aligning their strategies with evolving consumer needs and value expectations. Practical next steps include strengthening their innovation engine, leveraging data-driven insights to refine pricing and promotion strategies, and building engagement across both digital and physical channels.
Drawing on proven frameworks and in-depth knowledge of regional dynamics and of consumer needs can provide valuable guidance, helping brands not only strengthen their market position but also grow their category volumes.