Driven by the success of D1 in Colombia and Tiendas 3B in Mexico, a new retail model is emerging—one that reverses traditional hierarchies. Power is shifting from major brands to the private labels of hard discount chains.
This article was prepared by the team at Food Retail Italia, official representative of the international trade fairs Cibus and TuttoFood Milan in Latin America.
A structural shift in global retail
In recent years, the food and mass-market retail landscape has undergone a structural transformation that can no longer be dismissed as a temporary fluctuation. At the center of this shift lies the hard discount model, which has evolved from a marginal phenomenon into one of the driving forces of modern commerce—redefining competitive hierarchies and compelling the entire industry to rethink its approach to production, distribution, and branding.
Private labels—once perceived as budget options for lower-income consumers—have become the core value driver of this channel, playing a strategic role for both retailers and manufacturers.
The Colombian market is particularly emblematic:
- Tiendas D1 generates over 80% of its sales through private labels.
- Ara exceeds 40%, while traditional retailers such as Makro, Éxito, and Cencosud range between 11% and 25%.
Today, 66% of Colombian consumers consider retailer brands a valid alternative to national brands—an unthinkable figure just a decade ago. The private label has evolved from a substitute product into a symbol of trust, value, and increasingly, perceived quality.
The economic and social dynamics behind success
The rise of this model is not coincidental—it stems from precise economic, social, and technological dynamics. Rising living costs, eroded purchasing power, food inflation, and growing consumer focus on value for money have created the ideal conditions for a format that is agile, efficient, and substance-driven.
The hard discount store represents the pragmatic answer of a consumer unwilling to sacrifice quality yet unwilling to pay the surcharge of marketing. Here, price is the promise—and the private label is the means to deliver it.
What makes this model extraordinary is its ability to hybridize: operational simplicity now coexists with growing attention to supply chain control, packaging, sustainability, and even premium innovation. In this sense, hard discount retail has evolved into a sophisticated industrial platform, capable of providing both efficiency and margin to producers who can operate within the logic of standardization and controlled quality.
Europe as a reference point
Europe provides a crucial benchmark. In Spain, home to Mercadona and a fertile ground for private label development, nearly half of all FMCG sales now come from retailer brands. In Germany, where the model originated, Aldi and Lidl have achieved such efficiency and consumer recognition that their brand identity has merged with the product itself.
It is no coincidence that 70% of German consumers perceive no significant quality difference between national and retailer brands.
In these markets, competition is no longer solely about price—it revolves around the ability to balance cost, innovation, and sustainability. Retailers have established true R&D centers, suppliers have become technological partners, and subcontracting has evolved into industrial co-development.
This is also the direction taken by many Latin American chains:
- Tiendas 3B in Mexico, with over 60% private label penetration, invests heavily in logistics and digitalization.
- Ara in Colombia, owned by Jerónimo Martins, is expanding sustainable and organic lines.
- D1, the market pioneer, is building a network of certified local suppliers to reduce costs and improve traceability.
An ambivalent challenge for manufacturers
For the manufacturing industry, the ascent of private labels brings both risks and opportunities. On one hand, producers lose negotiation power and face pressure on margins. On the other, they gain stability and predictable volumes rarely achievable in branded markets.
Becoming a supplier for a hard discount chain means joining an ecosystem built on continuity, demand forecasting, and production planning. Companies that can guarantee consistent quality, punctuality, and logistical reliability find in this channel a stable partner and sustainable growth path.
However, the cost of entry is high. The dependence on a few major buyers introduces systemic risk. Retailers often dictate economic terms, technical specifications, packaging formats, and delivery schedules with near-industrial rigidity.
For small and medium-sized manufacturers, entering the hard discount supply chain means evolving into long-term industrial partners, adopting standards of quality, traceability, and compliance comparable to those of multinational corporations.
Redefining the value chain
Strategically, this phenomenon is reshaping the entire value chain. Traditional brands, built for decades on emotional communication and brand equity, now compete with unbranded yet perfectly coherent products that meet modern consumers’ expectations: efficiency, simplicity, and transparency.
Promotional activity loses relevance in a context where everyday low prices are perceived as fair, and loyalty is based on consistent, predictable experiences.
The rules of success in hard discount no longer depend on marketing creativity, but on the ability to function as part of a collective industrial mechanism—favoring predictability over exception, standardization over individualism, and efficiency over storytelling.
From supplier to strategic partner
In this new ecosystem, collaboration between retailers and suppliers takes on a symbiotic dimension. Retailers no longer seek mere manufacturers—they seek partners who share values, processes, and objectives.
Selection criteria are based on objective parameters: production capacity, flexibility, logistics reliability, environmental sustainability, and quality certifications.
While the economic component remains crucial, it is no longer the only one. The ideal supplier balances cost and value, scale and customization. Consequently, B2B relationships are evolving toward medium- and long-term contracts, often including co-development clauses and joint cost reviews.
In perspective, the retailer-supplier dynamic now mirrors that of the automotive or tech industries, where interdependence and operational transparency are prerequisites for mutual survival.
The evolution of the private label
The very concept of private label is evolving. Once defined by affordability, it now represents identity and responsibility. New generations value transparency, traceability, sustainability, and ethical consistency.
The retailer—combining the functions of distributor and brand—can craft a coherent narrative linking quality, ethics, and value. Hence the rise of premium, organic, and local private label lines.
Low-cost has matured into smart choice: competitive prices accompanied by refined design, sustainable packaging, and verifiable quality. The hard discount is no longer synonymous with low-end—it is a rational format that has stripped away the superfluous to return value to substance.
A macroeconomic reflection
At a macroeconomic level, the hard discount boom reflects a broader transformation in consumer behavior. Persistent inflation, wage stagnation, and rising energy costs have made consumers more selective and pragmatic, while digital transparency has reduced the symbolic value of brands as trust indicators.
In an era of information accessibility, loyalty stems from consistency of experience rather than communication.
Retailers that have understood this trend—D1 and Ara in Colombia, Lidl in Europe, Tiendas 3B in Mexico—are gaining market share at the expense of traditional formats. Mid-tier chains, on the other hand, struggle to maintain relevance: too expensive to be affordable, too mass to be premium.
How the industry must respond
The manufacturing industry must react with a dual strategy: efficiency and differentiation.
- Efficiency, because cost competition is inevitable—those who fail to optimize operations will be excluded.
- Differentiation, because only a distinctive positioning—through innovation, sustainability, or superior ingredients—can ensure survival in a market increasingly dominated by private labels.
Forward-thinking manufacturers now see collaboration with hard discount retailers not as a concession, but as a new industrial partnership model.
These suppliers are co-creators of value: they contribute to recipe design, packaging development, quality certification, and even category management strategies. In return, they gain production continuity, large volumes, and indirect visibility to millions of consumers.
A new industrial alliance
The rise of private labels in the hard discount segment represents a profound shift across the B2B ecosystem—a new alliance between industry and retail based on shared goals: delivering value to consumers, reducing waste, and innovating sustainably.
In this framework, the line between producer and retailer becomes blurred: both operate within the same value chain and share responsibility for quality and customer experience.
The challenge for the coming years will be to maintain this balance—avoiding over-consolidation and ensuring that efficiency does not suffocate diversity.
For suppliers, the path forward lies in quiet innovation: investing in processes, materials, and technologies that improve products without compromising affordability. For retailers, the mission is to build trust, communicate quality, and educate consumers to perceive private labels not as low-cost alternatives, but as conscious choices.
The lesson from Europe
If there is one lesson the European market offers Latin America, it is that the success of private labels is no longer measured by price alone, but by their ability to build a coherent and lasting identity.
Mercadona in Spain, Coop and Eurospin in Italy, Rewe in Germany, and Carrefour in France have demonstrated that retailer brands can become symbols of collective trust.
Latin American hard discount chains are moving in the same direction: D1 and Ara are setting new standards for quality, efficiency, and accessibility.
In the medium term, the maturation of these markets will depend on geographic expansion, vertical integration, and sustainable practices throughout the value chain.
This evolution is inevitable: the continent’s emerging economies cannot thrive without distribution models that balance inclusion, convenience, and responsibility.
A new paradigm for modern commerce
The hard discount is no longer a threat to national brands—it has become a laboratory of innovation and an engine of efficiency.
Private labels have become the language through which modern retail expresses its concept of value: essential, transparent, and accessible.
For B2B companies that can read the signals, now is the time to reposition, invest in quality, and build long-term partnerships with the new leaders of modern trade.
The future will not belong to the most famous brands, but to the most coherent ones—and in that coherence, private labels and hard discount have found their winning formula.
