Amazon.com Inc. (AMZN) has quietly updated its private label offerings to include coffee and baby foods. The new labels went on sale last week and are only available to Prime members.
The New Labels
Amazon’s new private label coffee is called Happy Belly. The coffee is small-batch, organic and fair trade and sells for a slightly lower price than other organic, small-brand coffees. Amazon's private label coffee is also competitive with other major coffee roasters.
The private label baby food brand is called Mama Bear. The baby food is also organic and competitively priced. (For related reading, see: Amazon Expands Roster of Consumer Goods.)
Amazon’s Private Labels
Amazon confirmed in May that it would be expanding its private label line to include food, diapers and cleaning products. These new labels are sold exclusively to Amazon Prime members as a value-added perk of their $99-per-year membership.
These private labels will be expanded to include more products including nuts, tea, oil and more baby products. A third private label called Wickedly Prime will sell snacks. Currently, Amazon sells Pinzon, a private label bedding and sheets company, as well as AmazonBasics which sells electronic and home accessories. The retailer also sells baby wipes under its Elements brand.
Why Private Labels Are Popular
Private labels are attractive to retailers because of their potential for higher profit margins. The companies are able to save money on brand development and advertising and have better control of product placement and packaging. For a company that ships everything, controlling packaging could lead to further savings in shipping costs. (For more, see: Big Money in Private Labels.)
Amazon launches its private label brands quietly. In fact, according to the Wall Street Journal and unlike other retailers, Amazon purposefully disguises their involvement in their private labels. Instead, the private label contact information leads customers to AFS Brands Inc., a company whose name stands for Amazon Fulfilment Services. Private labels are a big business. In 2015, private label sales in the United States increased by $2.2 billion to reach an all-time high of $118.4 billion.
The Bottom Line
Amazon is growing its private label business to include coffee and baby food. These labels will only be available to Amazon Prime members. Private labels offer retailers an ability to exercise better control over a product and potentially capture higher profit margins.