The Private-Brand Gold Rush Rewards Retailers That Rebuild Their Buying Culture Around Co-Creation

Private labels are moving from budget-friendly alternatives to core growth engines. In Europe, private-brand penetration in many markets exceeds 40 to 50%, and in the U.S., the trend is accelerating. When done right, private brands can anchor a retail portfolio, but there's a catch. Boardrooms want premium, differentiated brands, but many of their procurement teams still rely on legacy, cost-cutting playbooks. The organizations that can successfully execute on a private-label strategy will be the ones that fundamentally rethink how they source, develop, and bring products to market.

Pedro Carmo is a private-brand strategist and consultant who brings over two decades of experience in global sourcing, procurement, and private-label development to FMCG retailers. As Director of Global Sourcing and Procurement for NPD and Private Brands at Daymon, he works with some of the world's largest retail organizations on private-brand strategy, manufacturer partnerships, and category development across multiple continents. In his view, the shift from cost play to growth strategy is inevitable, but only succeeds when organizations change how they operate and not just what they sell.

"Private brand allows retailers in the very competitive FMCG arena to have a key differentiation pillar, but this pillar is also a growth engine," Carmo says. The recognition that private brand has evolved from a cost lever into a strategic driver of loyalty, market share, and product uniqueness is what he sees reshaping the function globally.

The culture problem

Though the ambition is there, the organizational capability is often lacking. Across markets, Carmo identifies a similar failure pattern where retailers understand that private brands are critical to their future, but their internal structures are still built for a previous era. "We still have a lot of retailers operating with models that were designed for cost extraction, not for collaboration, innovation development, or knowledge transfer," he says. "The leading retailers are the ones that realized they need to reshuffle their capabilities and look at their manufacturer base with different models. One size does not fit all."

The problem is cultural as much as structural. When every buyer's primary KPI is to generate savings, every supplier relationship becomes adversarial. Innovation requires the opposite approach, with deep partnerships where both sides invest in building something neither could create alone. "For generating innovation faster than anyone else, to have very unique items that for six months will give you market leadership, you need different models," Carmo asserts. "You need to build a culture where private brand is the engine of that culture."

Segment the category, not just the business

Carmo's operating framework is built on a principle he's applied throughout his career: the Kraljic Matrix, a procurement methodology that segments suppliers and categories by strategic importance and supply risk. Applied to private brands, it forces retailers to stop treating every product family the same way. Within a single category, 30% of the revenue stream might be fully transactional, like commoditized products where competitive tenders and price pressure are appropriate. But as Carmo explains, the same category might also hold an opportunity for a unique, science-backed innovation where the retailer works with a single manufacturer in a co-creation model, free from price benchmarking against existing products. "If you're going to innovate in a category, you are not tied to price comparisons to a product that already exists. It gives you the opportunity to launch an item in a different way. In those key innovation categories, much more than price, what retailers need is a really strong vetting operation to identify the one or two manufacturers they should be discussing future development with."

Simplicity as competitive advantage

Carmo's clearest example of this model working at scale is Mercadona, the Spanish retailer now expanding into Portugal. Where competitors might carry eight brands in a commodity category like cling film, Mercadona carries one private-brand offer with one supplier. The operational result is immediate. Instead of eight negotiations, weekly orders, warehouse movements, and invoices, the retailer has to manage just one of each. 

The deeper advantage he sees is expertise. "Mercadona allows their buyers to really be experts in a product, not just a negotiator or a product developer. A buyer at Mercadona who handles tomato paste will know more about that product than a similar buyer at a competitive retailer. That is a culture shift." With fewer suppliers and fewer SKUs, buyers invest time in understanding manufacturing processes, capabilities, and innovation pipelines. They become product specialists rather than deal managers. The supplier, working in a collaborative rather than competitive relationship, has incentive to bring their best ideas forward rather than protecting margin.

Ambition fails without capability

For retailers, Carmo offers a cautionary word. Layering private-brand growth targets onto organizations still structured around legacy buying behavior will stall. Though the strategy might look right on paper, product solutions will never make it from concept to shelf without the internal culture to support them. "You might be able to find a solution, but if you don't have an internal culture that allows that solution to become a reality, it won't work. You need logistics, warehousing, marketing, shelf pricing, and supplier management all aligned. That transition of models is the key challenge."