Dive Brief:

• Amazon has launched a series of private-label foods, including coffee and baby food, the company confirmed to CNET.

• The e-retail giant’s Happy Belly coffee and Mama Bear baby food quietly went on sale in the last few days without any fanfare from the company, available only to U.S. Prime members.

• The items join AmazonBasics, Amazon Elements, a host of apparel labels, and Kindle and Fire devices as private labels exclusively offered by Amazon.

Dive Insight:

These days, retailers are more likely to give their store brands some worthy attention with better packaging and promotion, some with an added pride of ownership. Amazon is taking that tack with many of its labels; the new food items have no overt reference to Amazon itself, CNET reports.

In a shift from the previous approach to store brands, the quality of the product itself is also often perceived—and shown in testing—to be equal to or even better than name brands. In some cases, store brands and name brands even share a manufacturer. In fact, many mainstream media stories tout store brands as a good alternative to more expensive counterparts, advising consumers to opt for the better value. 

One notable exception is Amazon’s foray into diaper sales: The retailer pulled its offering last year after quality issues surfaced and hasn’t rebooted the effort. 

Consumers' diminishing sense of loyalty and willingness to try new things—often a problem for retailers—have been a boon to the success of store brands. Such “generic” brands saw sales of $118.4 billion in 2015, an all-time record and an increase of $2.2 billion over the previous year, according to the Private Label Manufacturers Association. In the past two years alone, annual sales are up 5%, or $5.4 billion, in the major retail channels, according to PLMA’s 2016 Private Label Yearbook. A fifth of U.S. consumers’ supermarket spending is on store brands, according to Nielsen, and 96% of consumers buy store-brand grocery products of some kind. Those sales enjoy higher returns because they don’t carry the high level of marketing costs that name brands do, and store brands even represent an avenue for customer loyalty.

As with any branding strategy or loyalty program, that means retailers must develop store brands with special attention to what their customers want. Amazon has an especially powerful tool in its algorithm-based assessments of what sells, and its Prime program is sticky for the retailer with many of its private label goods available only to its Prime members. Keeping its private labels a Prime-only option fuels a positive spiral, giving people another reason to join the lucrative program. 

All these moves are major threats to traditional retailers, even those with strong store brands of their own. In some cases, Amazon is also a threat to its own merchants, as it moves to bring products remarkably similar to those sold on its marketplace.