“When you do private label right, it is an opportunity to offer really high-quality items at the most affordable and accessible price point,” Schneider said. “In the last few years coming out of COVID, it seems like it's been increasingly on people's minds that they want more affordable groceries, and private label has been able to help people make their budgets work and get access to what they want.”
‘Creating economic value and social value’ with private label
While private-label brands historically have lagged national brands, private-label brands are starting to keep up with the pace of innovation, responding to consumer demands faster, Schneider said.
“This stigma ... of being a fast or sometimes a slow follower and a slightly lower quality, lower price version of what you see in the branded space, I think people have been shedding that idea and starting to embrace the potential of developing store brands as a brand that can complete innovation that doesn't need to be slow.”
He elaborated, “As long as there's a strong partnership between the retailer and their manufacturers, then you really can do all that. You can innovate, you can test concepts, you can do things that push the envelope a little bit, and [you can] really focus on creating economic value and social value.”
Private-label brands also are responding to younger consumer demands for more sustainable products, Schneider noted. Increasingly, private-label brands are coming to FedUp Foods with sustainability requirements, like the product being Fair Trade certified, where they might have been less likely to consider it when the company started in 2019, he said. This represents "a bigger shift in our society towards wanting to eat and drink things that are good for the planet," he added.
Additionally, private-label brands have an opportunity to streamline the shipping logistics from manufacturers to store shelves, Schneider noted. ALDI has been "pretty vocal publicly about wanting to be as sustainable as possible with their logistics," and FedUp Foods is exploring “tactical” ways of reducing greenhouse gas emissions by finding new ways to package and ship products, he added.
"Is there a way that we can reduce the weight of a case of product enough so that we can get an extra pallet of products on the truck?" he said. "If we can fit one more pallet on every truck that we send out, we can take X number of trucks off the road by not needing them and save so many tons of greenhouse emissions. And that's something that really close partnership between retailers and manufacturers enables."
FedUp Foods also is keeping track of the sustainability practices of its ingredient suppliers, ensuring that they are promoting topsoil health, as it develops private-label functional beverages, he added.
“Being able to work with suppliers that take land that wasn't farmable, and through their practices, revitalize it, and make it farmable, that is something we track through our supplier partnerships and the programs they do, and I think is more and more relevant. I'm really happy that everyone we work with in private label has been open to that, and it's something I'm hoping continues to grow in the food industry as a whole that we continue focusing on building healthy topsoil.”
Can private-label become a leader in gut-health?
Private-label brands are also tapping into broader better-for-you and functional consumer trends, Schneider said. FedUp Foods is tracking a number of trends from gut health to longevity, as it looks to develop functional beverages for its customers to meet these demands.
Having experience working in the kombucha market for over a decade, Schneider has seen consumer awareness of gut health evolve to a point where people are looking at devices and personalized supplements to support a healthy microbiome. Among its private-label capabilities, FedUp Foods offers a range of gut-friendly beverage manufacturing options, including kombucha, kombucha spritzer, prebiotic soda, functional energy drink, water kefir soda, and tepache.
“Olipop and those prebiotic sodas ... came out of an understanding of the role that dietary fiber plays in overall health, which grew out of people's understanding that a healthy gut contributes to a healthy mind and a healthy body in so many ways. We're just starting to scratch the surface of what it means to have a healthy microbiome. And so, it started with probiotics in a lot of ways and has expanded to fiber, and now, there's a lot of talk around insulin resistance and continuous glucose monitoring.”
While adaptogens and functional mushrooms like reishi and lion’s mane have become popular ingredients, they are “still trying to find the right way into beverages,” with some brands finding success while others are struggling, Schneider said.
“Functional beverages can be so crowded, and it costs so much money to create national awareness for a brand, that not all these ideas will have that right combination of design, flavor, funding, [and] expertise to really create a consumer trend. But, all of them fall under this bigger trend of people getting way more in touch with their own bodies and ... trying to learn and understand how to nourish their bodies in a way that builds long-term health and wellness.”
Doing what’s right for the planet, saying no to private equity
Unlike some younger food and beverage companies, FedUp Foods hasn't relied on private equity to grow its business, Schneider said. While acknowledging the potential benefits of private-equity funding, Schneider said that FedUp Foods has turned away from private-equity deals in the past to control the company’s destiny and stay true to its mission.
“We make decisions that don't always maximize profitability, but they walk our values. And we didn't want to be in a position where we were ever having that conversation with an outside funder around a decision we were making that we thought was right for the planet, but it's going to sacrifice our profit for a little bit, but it'll be worth it in the long term."
With the help of its CFO Angela Timm and "being pretty prudent" on company finances, FedUp Foods has been "insulated from the ups and downs of what's happening in the venture world," Schneider said. The company is now reinvesting into expanding its production capabilities to grow into other functional beverage categories, Schneider explained.
“We're trying to grow and invest and continue supporting retailers and shoppers by building a strong fundamentally sound business that allows us to be agile and innovative and responsive to what the market is asking for and help create private label programs that are those things as well. [It’s] not just slow followers or national brand equivalent stuff — like really new and exciting things. That's what we get excited about.”