This article focuses on the rapid rise of private labels owned by retail channels in recent years, with key takeaways below:

1. Today’s private labels are fundamentally different from their early iterations: In the past, private labels were merely shelf fillers positioned as low-price, low-quality goods. Now they have expanded into high-frequency consumption categories including baked goods, fresh milk and condiments, most of which are manufactured by mature leading factories such as Mengniu and Haitian. They offer reliable quality, which contradicts the old stereotype of low quality.

2. Why private labels can deliver good quality at lower prices: Retailers concentrate order volumes on a small number of SKUs to lower per-unit production costs. They also cut out brand marketing expenses such as advertising and shelf placement fees that traditional brands incur, passing these savings to consumers through lower prices. In addition, they can quickly adjust products based on consumer feedback to deliver a better experience.

3. Shopping guidance: For standardized, low-decision-cost products such as milk, paper towels and daily necessities, consumers can prioritize private labels for higher cost-performance. For categories that require professional judgment such as cosmetics, mother and baby products, and athletic shoes, traditional specialized brands remain a safer choice.

This article summarizes the impact of the rise of retail channel private labels on traditional brands, with key takeaways below:

1. Current consumer and industry trends: Affordable alternatives and "quality over premium pricing" have become mainstream in consumption. The average price of major domestic fast-moving consumer goods (FMCG) categories has declined continuously since 2021. The growth of content platforms and e-commerce has eliminated information asymmetries, continuously compressing the premium space traditional brands gained through advertising and mindshare building.

2. Risk warning: Private labels hit hardest on high-frequency, highly standardized, low-decision-cost categories. Brands stuck in the middle with no clear product differentiation, which have long relied on marketing to sustain premiums, face the greatest survival pressure, with both market share and profits getting squeezed.

3. Strategic direction reference: Brands that truly create new categories and build strong consumer mindshare will not be displaced. Brand owners need to build genuine product differentiation and earn consumers’ decision trust, rather than treating marketing packaging as the full value of a brand. High-quality supply chain brands can also start by OEMing for leading retail channels, then build their own private labels once they have accumulated credibility and production experience.

This article analyzes the industry shifts brought by the rise of retail private labels, with key takeaways on opportunities and risks for sellers below:

1. New opportunities: Leading retail channels such as Hema, Sam’s Club and Pupu have been rapidly expanding their private label lines in recent years, creating large demand for high-quality, stable OEM suppliers. For sellers with available capacity and good product quality, OEM partnerships deliver large, stable orders to absorb idle capacity, improve capacity utilization and ease inventory pressure. They also gain exposure and consumer trust through the endorsement of strong retail channels, laying a foundation for launching their own brands later. Yoplait and Mobi Garden have successfully followed this path.

2. Risk warning: If you are a seller running your own private label in standardized, low-decision-cost categories with no clear product differentiation, and rely primarily on marketing for premium margins, you will face intense competition from channel private labels, and your operating space will continue to shrink.

3. Strategic reference: Sellers need to recalculate the ROI of building their own private label. If you have no clear product differentiation, the return on blindly investing heavily in a D2C brand will continue to decline. You can choose between OEM or own-brand development based on your own conditions.

The rise of retail private labels has brought new changes and opportunities for factories, with key takeaways below:

1. Changes in production demand: Today’s private label business is no longer simple OEM/ODM. Retail channels participate directly in product development, quickly passing consumer insights such as preference for specifications and price tolerance to factories, and requiring factories to adjust production plans accordingly. This raises higher requirements for factories’ flexible production capabilities and market response speed.

2. New business opportunities: Many domestic FMCG categories are currently facing overcapacity and insufficient demand. Factories can secure large, stable orders by OEMing for leading retail channels, absorb idle capacity, improve overall capacity utilization, and ease pressures such as excess raw material inventory (e.g. milk sources). At the same time, when high-quality factories OEM for leading channels and their products win consumer recognition, they can gain consumer exposure through the channel’s endorsement, and get the opportunity to launch their own brands later. Mobi Garden, which started OEMing for international brands, is a successful example.

3. Development inspiration: Factories do not have to stubbornly pursue building their own D2C brands. For factories that only operate mature standardized production capacity, OEM may deliver a higher return on investment than building a brand at high cost. High-quality production capacity will actually attract more cooperation opportunities from leading retail channels.

This article sorts out the new trend of rising retail private labels in the FMCG industry, with key takeaways for service providers below:

1. Industry development trend: Private labels have evolved from their early role as shelf fillers to become a core part of differentiated competition for leading retail channels. They are rapidly expanding into high-frequency standardized FMCG categories including fresh milk, baked goods, condiments and daily necessities. According to industry reports, from 2022 to 2024, the average number of new private labels added per retailer per year increased from 83 to 142, marking rapid industry growth that will sustainably drive up demand for related services.

2. Core pain points of clients: On one hand, traditional mid-tier brands face compressed premium space and declining market share, and lack clear guidance on how to adjust their brand strategies to adapt to changes. On the other hand, retail channels need to source from high-quality factories, optimize supply chains, and develop tailored products for private labels, while factories need to access stable channel orders and adjust their production systems. Both sides face pain points in matching cooperation and improving operational efficiency.

3. Business opportunities: Service providers can develop new offerings along the private label industrial chain, including supply chain matching, consumer data analysis, flexible production transformation, product development adaptation, and brand strategy consulting, to meet the needs of all links in the industrial chain and capture the growth dividend of this sector.

This article summarizes experience from leading platforms in developing private labels, with key takeaways for platform operators below:

1. Category selection experience: When developing private labels, prioritize high-frequency, low-decision-cost standardized categories with mature production systems. Consumers do not need extensive professional judgment for these categories, are more likely to trust channel endorsement, face lower barriers to entry, and gain higher consumer acceptance. At present, categories that require strong professional judgment such as athletic apparel, cosmetics and mother and baby products are not suitable for large-scale private label development.

2. Operations and pricing logic: Cooperate with leading mature factories for OEM to guarantee product quality and eliminate consumers’ quality concerns. Concentrate purchase volumes on a small number of SKUs to lower unit production costs, cut out advertising and marketing expenses incurred by traditional brands, pass cost savings to consumers through lower terminal prices, and build a "high quality at fair price" advantage. Retailers should also stay close to end consumers, and quickly adjust product specifications and optimize costs based on repurchase data and user feedback to improve product-market fit.

3. Shelf operation considerations: Private labels are core to a channel’s differentiation, but they do not need to, and should not, completely replace traditional leading manufacturer brands. Shelves should retain strong established brands to both enrich product offerings to meet diverse demands, and act as price anchors to help consumers make judgments and lower their decision-making costs.

This article examines new changes in the FMCG industry driven by the rise of channel-owned private labels, with key findings below:

1. New industrial trends: For a long time, building a D2C brand for upstream suppliers was widely seen as an inevitable path for the industry, with branding viewed as the only way to capture higher profits. In recent years, as leading retail channels have aggressively expanded private labels, this rule has started to diverge. Channels now define products themselves and control the access to brand value, reshaping the original value distribution structure of the FMCG industry.

2. New industry structure shifts: Private labels will not completely replace traditional national brands; outcomes vary by category. For high-involvement categories that require professional judgment, strong traditional brands still hold irreplaceable value and are unlikely to be displaced. In standardized low-involvement categories, however, mid-tier brands with no clear product differentiation that rely on marketing to sustain premiums will face severe pressure, while high-quality supply chain enterprises have gained new development paths.

3. New changes in business models: Branding itself has not become obsolete. What is obsolete is the old model that treats marketing packaging and advertising spending as the full value of a brand. In the new model, brand value comes either from product differentiation and category mindshare, or from stable production capacity and channel endorsement, leading to increasingly clear industry stratification.