Milk. Cereal. Baby Food: Amazon’s Ingredients For A Private Label Play

Amazon, in its ongoing campaign to sell everyone everything, is getting ready to launch a slew of private label brands which will include foodstuffs such as milk, cereal, and baby food, as well as household cleaners, people familiar with the matter told The Wall Street Journal.

Amazon is far from the first to this particular trough – but it is a profitable play to play. Private labels generate strong margins, and for some mass-market retailers (Trader Joe’s springs to mind), they are a tool to enhance consumer loyalty among those who come to prefer a store brand to the name-brand.

The Amazon brand is Elements — which is only available for Prime customers — and it seems that Amazon has recently sought trademark protections for a few dozen categories under that brand. Some of those items include coffee, soup, pasta, water, vitamins, dog food and items like razors, cleaning supplies and other household goods.

According to those with insight into the situation, Amazon has additionally sought out partnership opportunities with some private label food manufacturers, including TreeHouse Foods Inc. of Oak Brook, Illinois. TreeHouse is big private label player that reported $3 billion in sales last year.

Quality control will be a leading concern for Amazon. Diapers and wipes were Elements’ initial offerings – but the diapers didn’t last that long. A month in, they were pulled after customers complained about quality. Those concerns will get more important when people start eating Amazon’s products.

But Amazon has a long flirtation with private labels – it has sold its own batteries, USB cables, backpacks and even ceramic plates under the Basics label, noted for its spartan black-and-white color scheme. Amazon also sells patio furniture and linens under its Strathwood and Pinzon brands. It doesn’t always pan out – tools and cookware were reportedly a bust – but Amazon remains interested.

“It makes a lot of sense for any retailer to get into private label,” Eddie Yoon, a principal at brand consultancy The Cambridge Group, told WSJ. “Private label has a lot of room to grow in terms of sales and can attract a new value-focused customer.”

Private-label packaged goods were worth around $120 billion market in the U.S. in 2014, up 2.1 percent from 2013, according to market researcher Information Resources Inc., and private-label merchandise grabbed up 18 percent of U.S. merchandise spending.

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