How Retail Chains Choose Private Label Suppliers
Serhii Chornyi, Director of the Private Label Development Department at VARUS
What are the advantages of Private Label products for customers?
Traditionally, Private Labels entered the market as a cheaper alternative to well-known brands. This is the main priority of retailers developing Private Labels — to keep prices low without compromising on raw materials. Today, Private Labels are an important part of retail marketing, allowing retailers to position their products ideally in the market and remain independent from foreign brand suppliers. According to Consumer Reports, the quality of Private Label products is comparable to, or even better than, that of well-known brands.
An important aspect is that buying Private Label products from well-known chains is safe because their quality is guaranteed. For example, VARUS collaborates only with trusted manufacturers and enterprises that have proven themselves to be reliable partners. These companies comply with all Ukrainian legal standards, and their products undergo thorough inspections at all levels. So, when buying Private Label products from well-known retail chains, you can be confident that the product quality will meet your expectations.
How to choose suppliers
Private Label products for retailers are produced by both Ukrainian and foreign companies. For instance, VARUS often works with large, reputable enterprises that produce well-known brand products. VARUS managers establish partnerships, taste-test the products, discuss terms, and verify all necessary documents. Then, the magic happens — and alongside popular brand products, VARUS Private Label items are packaged. The network has 12 Private Label brands offering about two thousand product lines.
VARUS also collaborates with small manufacturers, but only if they have passed the necessary certification and possess all documents confirming compliance with quality standards. VARUS has a scoring system for products, evaluated through closed tastings. If a product does not score enough points in terms of quality, it will not be introduced into the network, even if the manufacturer offers favorable terms. The passing score differs for various Private Labels.
It is important to us that VARUS customers receive only the highest-quality products. Before products reach store shelves, and eventually the customer’s cart, VARUS’s quality department checks the composition of goods to ensure they meet the requirements and legislation of Ukraine.
Cooperation with national and international partners
About 93% of Private Label products are produced by local manufacturers. Today, the market has stabilized, and serious problems with Private Label suppliers are no longer common.
However, we understand that the full-scale war in Ukraine has affected all aspects of life. Ukrainian manufacturers faced a shortage of production capacity, which had a negative impact on Private Label production across the market. Companies with branches in the east and south of the country lost stability in production. The need to relocate facilities, combined with air raid disruptions or even shelling, meant manufacturers could no longer guarantee the required volume of products on time. However, this issue did not last long, as the influx of generators into the Ukrainian market quickly restored production capacity for most manufacturers.
It is worth noting that supporting Ukrainian manufacturers during this challenging time remains a priority for our company. We are in constant contact with suppliers and adjust our work on an individual basis.
As for working with foreign manufacturers, it comes with other challenges, such as increased logistics costs and the unstable national currency exchange rate. We increased purchases to secure food supplies at stable prices, replaced some products with Ukrainian equivalents, and decided to contract transportation in advance, safeguarding ourselves from sudden price spikes.
Trends in customer perception of Private Label products
The full-scale war forced Ukrainians to adapt to threats and economic changes. According to NielsenIQ research, 90% of people, to some extent, began saving on daily consumables. Many customers shifted from the mid-price segment to the lower one. The powerful volunteer movement also contributed to this shift — the need to purchase goods in large volumes made Private Label products more desirable.
However, compared to European countries, the share of Private Label products in the Ukrainian market remains quite low. Proper introduction of Private Labels often guarantees success and brings excellent results based on customer feedback.
The Private Label direction has great potential. We are witnessing an increase in the popularity of Private Label products: in 2023, the share of sales of private brands in the market reached 36%, surpassing the figures of the same period in 2021 by 3%, and in 2022 by 12%.
VARUS plans to increase the share of Private Label by almost 25% in the coming years. This includes the development of Private Labels and the expansion of their share across all categories, both FOOD and NON-FOOD, without exception.
Analyzing the needs of our customers, VARUS continues to focus on producing goods under the “Vyhoda,” “Chysta Vyhoda,” and Varto brands. These brands are distinguished by their affordability while maintaining high product quality.
It is likely that, despite the risks of wartime, Private Labels will continue to develop. Customers need Private Label products, and it is our duty to do everything possible to meet their needs.