By now, you have probably noticed that private labels are having their moment in the sun – the type of moment that is reshaping the entire CPG industry. If you’ve been a part of the industry for many years, even decades, you may think the current competitive landscape is nothing new; however, I challenge you to reconsider that thought process.

It’s true that retail-owned private label brands are nothing new to the CPG industry. Legacy brands have shared shelf space with them for decades. The main difference is that these private label brands are now seen less as “trade downs” by consumers, especially Millennials. In fact, according to a recent Nielsen report, private label items are bought more frequently among Millennial shoppers than previous generations.

My theory is that when the Great Recession hit its peak in the second half of 2009, consumers, especially older Millennials that were fresh into the terrible economy, were left with less discretionary income. Because of this, open-minded buying habits gave way to private label trial periods, which proved acceptable. This offered retailers confidence to further invest in improving, diversifying and even creating premium private label offerings. Kantar Retail’s grocery analysts have predicted that private label growth between 2017 and 2022 will outpace the previous five years.

Amazon Is Changing the Private Label Game

With the first digitally-native generation shifting its consumer spending towards private label offerings, Amazon, the biggest e-commerce retailer, naturally followed the trend by launching its first private label offering, Pinzon, in 2009. With decades of customer information at their disposal, Amazon has continued to use that deep intel to launch private labels. In fact, several reports point to Amazon currently owning around 100 private label brands that were on pace to generate $7.5 billion in 2018 as of June. Though some of these labels bare the Amazon name, the vast majority do not.

Though Amazon’s private label success is undeniable, estimates from investment firm SunTrust predict that revenues will climb even further to $25 billion by 2022. That growth rate is staggering, but optimism is high, as Amazon launched the Amazon Accelerator Program in early October of 2018. This program essentially flips the normal private label creation process on its head. Instead of Amazon coming up with ideas for all of the brands and products and then putting them out for bid with manufacturers, it is inviting manufacturers to “join the Amazon family of brands” and be part of the creation process.

With this invitation, Amazon is essentially eliminating time spent on brand and product development processes and allowing approved manufacturers to launch “exclusive” ideas on the platform. In exchange, Amazon will give these approved manufacturers an array of valuable resources, services and placements that usually have high costs associated with them for vendors and sellers. This new partnership model allows Amazon to create private label and exclusive brands at a much faster and dynamic pace. Early indications are that its working extremely well, as the Amazon Accelerator program has created over 100 new exclusive and/or private-label brands in only two months.

How Big Brands Can Win

The proliferation of Amazon’s private label brands and the accompanying increase in competition on the biggest e-commerce retailer might seem daunting, but here are five ways your CPG brand can win against Amazon private label brands.

Directly Communicate with Consumers

First and foremost, big CPG brands need to take ownership over their communication with customers. At the same time our country was hitting peak Recession, social media companies were rolling out feature sets that allowed businesses to have a presence on their massively growing platforms. This shift in communication was arguably the biggest since television became popular in the 1950s. For almost 70 years, brands had to pay large amounts of money for national television advertising because they did not have the means to self-distribute content. Today, they have the same access to distribution as any media company. A global audience awaits to connect with your brand’s story on social media platforms like Facebook, Twitter, Instagram and YouTube.

Have a Direct-to-Consumer E-commerce Website

As Amazon more aggressively focuses on private labels, CPG brands will increasingly seek to control their own points of sale. One of the biggest and broadest shifts is with big CPG brands developing their own direct-to-consumer e-commerce websites. This allows them to control the buying process and offer exclusive customer experiences that are best delivered without wholesalers and third-party retailers. Additionally, a direct-to-consumer website allows a brand to completely control its image from the moment it first engages with a consumer until the customer has the brand’s product in their house. Competitors are essentially removed from the equation, allowing the customer to see the product perfectly.

Seek Rich Customer Data

The shift to direct-to-consumer e-commerce websites and social media has provided a great deal of opportunities for CPG brands. Arguably the biggest opportunity is the ownership of a massive amount of rich customer data that can be analyzed to make stronger business decisions. This is a huge shift from the past, as brands used to rely on retail partners to report customer information back to them. This information was often vague or hard to manipulate for various needs.

Alternatively, a brand can now get as much customer data as they need. L’Oréal, for instance, discovered that ombré hair color was trending on social media. The cosmetic company responded with a new product and backed it up with a dedicated consumer marketing plan. This customer and market data can sometimes be only seconds old, and this speed can give you advantages of being first to market on trends.

Expand Your Portfolio

The quickest way to separate your product from private label offerings is through innovation. While private label brands may attempt to emulate innovative products, consumers will likely first associate those products with the CPG brands that were first to market.

If your brand’s core competency is not innovation, use mergers and acquisitions (M&A) to fill your pipeline with offerings from emerging product categories. On the other hand, don’t only look at lateral M&A targets. As an example, Nestlé invested in direct-to-consumer startup Freshly in 2017.

Finally, look to diversify big M&A targets by taking little product or brand bets through a venture fund or incubation unit. This will allow you to “peek under the hood” at different concepts without committing the bulk of the company’s creative and product development resources to internally build.

If You Can’t Beat Them, Join Them!

The new Amazon Private Label Accelerator Program is open to all brand manufacturers. This program gives you a deeper opportunity to test and learn on the growing Amazon marketplace. This could lead to a richer relationship with the leading e-commerce retailer, one that doesn’t seem to be showing any signs of slowing down.