Analyzing Competition Between Store Brands, National Brands
By Jack Grant
The simmering competition between traditional national brands and increasingly popular private label products continues. And it’s no wonder. Research shows that eight of ten consumers (80%) believe store brand products are equal or superior to national brands in terms of quality, value and packaging.
Retailers have introduced sophisticated strategies to build store brand dollar and unit share growth, while makers of national brand manufacturers have responded with aggressive new marketing strategies of their own. Add a sour economy and the battle for market share is on.
“Store brands growth galloped during the recession as shoppers revised their definition of value to be much more focused on price,” said Sean Seitzinger, senior vice president, Consulting & Innovation, SymphonyIRI Group. “Today, growth continues at albeit a slower pace as the economy recovers, but store brands are here to stay and are gaining in importance. As retailers accelerate investment in aggressive assortment, product and promotion strategies, we expect store brands to play a critical role in offering value and differentiation.”
The research firm has published two new reports that analyze the dynamics of today’s store brands market. New executive research, titled Understanding and Mitigating the Private Label Threat, published annually, provides a highly-detailed perspective on the store brands market and is tailored for national brand manufacturers. The current issue of the firm’s monthly Times & Trends, Store Brands: More Than Just a Safe Harbor in Turbulent Times, provides manufacturers and retailers insight into current and emerging store brand trends as well as influencing factors that are helping to define the CPG industry of tomorrow.
Information from these reports aims to assist marketers as they develop their product, pricing, merchandising and promotion strategies moving forward.
Both reports outline important strategies for manufacturers to consider, including:
- Continually identify and assess brand-specific opportunities, such as optimal price gaps versus store brands and means to protect and grow share in categories where there is a strong store brand presence through value-oriented promotions.
- On an ongoing basis, redefine pricing strategies to ensure alignment against the needs of key consumer segments.
- Invest in product, packaging and promotion innovation across key categories.
- Implement highly-targeted and affordability-oriented marketing campaigns where store brands exhibit the greatest threat.
- Implement metrics to monitor actual versus planned impact of store-brand related initiatives.
In addition, the Understanding and Mitigating the Private Label Threat research includes a section devoted to specific-store brand mitigation strategies as well as provides multiple case histories.
The Times & Trends report also offers a section on recommended retailer strategies, which include:
- Continue to understand core shopper needs and align new product strategies accordingly.
- Tailor offering at the market level, while supporting store brands with consumer-centric and highly-integrated marketing campaigns.
- Evaluate feasibility of multi-tier offerings across key categories and product lines.
- Review pricing strategies to ensure alignment with store goals.
- Analyze product development best practices across departments to identify low-cost innovation opportunities.
- As with manufacturers, retailers should test market product, pricing and promotional changes before and after rollout as well as track/benchmark store-level brand share shifts relative to national brands.
“Store brand success moving forward hinges on real marketing prowess,” said Susan Viamari, editor, Times & Trends. “The need to understand and deliver against the most pressing needs of consumers is high. Those who do so effectively will be rewarded with share of wallet and, perhaps, true shopper loyalty.”
AUGUST 2010
Market Watch
Store Brands Continue to Outpace National Brands
By Jack Grant
Private label revenue and share have hit record levels.
Store brand products scored strong gains across all major U.S. retail channels in 2009 as consumers increasingly switched from national brands and drove store brands to all-time highs in volume, total revenue, and market share, according to latest industry statistics published in the 2010 Private Label Yearbook from the Private Label Manufacturers Association (PLMA).
On the heels of a powerful growth surge for store brands in 2008, sales of the products increased again last year by +1.8 billion units while national brand units were down -2.1 billion. Along with the conversion of a full percentage point in unit share from national brands to the private label column, store brands added $2.7 billion in value to reach $86.4 billion in total sales. National brand sales increased by $1.6 billion, but those gains were largely, if not entirely, the result of higher prices.
Dollar growth in all three mainstream channels – food, drug and mass - was a lackluster +0.8 and unit sales declined -0.2%. While overall sales for the nation’s retail chains reflected a generally sluggish economy, store brands were far and away the industry’s star performers.
In supermarkets, private label reached an historic high of 23.7% in unit share. Units were up +6.4% for the year compared to a decline of -1.7% for national brands. The growth in store brand units (+1.7 billion) more than offset the erosion of national brands (-1.5 billion), resulting in a net gain for the channel as a whole and stemming a multi-year trend of overall unit losses in U.S. supermarkets.
On the revenue side, store brands accounted for 90% of all gains in supermarkets, adding $1.5 billion in new sales (+2.9%), while national brands were virtually flat (+0.1%). Moreover, the decline in national brand units suggests that even their modest sales gain of $200 million was a result of price inflation. Overall, store brands sales in supermarkets reached $55.5 billion and dollar market share climbed to 18.7%; both figures were new all-time highs.
In drug chains, market share in units reached 16.3% as volume grew by +4.0%. National brands recorded a loss of -3.9% in units. As in supermarkets, the absolute growth of 461 million store brand units across all departments more than made up for the channel’s loss of national brand volume (-378 million).
Store brands were responsible for 52% of the total sales growth in drug chains, adding close to a half billion dollars in new sales. Store brand revenue grew at a vigorous +8.8%, while national brands tacked on only +1.2% in sales. The total value of store brands sales in drug chains was $6.1 billion, and dollar market share was 14.1%; both figures were also record.
“First published in 1992, the PLMA’s annual Yearbook’s coverage has grown from fewer than 200 product categories to more than 700, reflecting the expansion and penetration of private label products in the marketplace,” said Brian Sharoff, PLMA president.
“The past year has even greater significance since it is the first full year of the impact of the recession. Not surprisingly, the statistics document the amazing increases in store brand popularity. But as most market researchers know, the growth of store brands is by no means a recessionary phenomenon. Its success began years before the current downturn and is rooted in increasing assortment, quality ingredients, innovative product concepts, and retailer commitment,” he added.
Data for the Yearbook was compiled by The Nielsen Company for the 52 weeks ending December 26, 2009. PLMA publishes quarterly sales and store brand market share statistics from The Nielsen Company online at www.plma.com.
Recognized retailers and wholesalers may request a complimentary copy of the print publication by calling 212-972-3131. It is also available for purchase by non-members at a cost of $1,500.
PLMA represents more than 3,000 companies around the world and offers trade shows, programs and services for its members and retailers.
PLMA Trade Show in Nov.
The annual Private Label Trade Show, hosted by the Private Label Manufacturers Association (PLMA), is scheduled Nov. 14-16 at Chicago’s Rosemont Convention Center.
Exhibitors from more than 35 countries will display their wares in more than 2,000 booths. Product categories include fresh, frozen and refrigerated foods, beverages, snacks, and shelf-stable groceries. On the non-food side, there is household and kitchen, paper and plastics, health and beauty, GM and DIY.
In addition to the exhibit of products, the event will feature seminars, workshops, an Executive Education Program, and opportunities for networking among retailers, suppliers, brokers and sales agents.
For more information, contact PLMA at (212) 972-3131.
Store Brands Help Budgets
Almost two of three (65%) U.S. consumers say they are buying more store brands to save money, slightly up from February when 63% said they were doing so, according to an online poll of 2,227 adults by Harris Interactive.
More private label purchases are part of a widespread change in consumer behavior because of the sour economy. Other changes uncovered by the survey included brown bagging lunch, switching to refillable water bottles instead of purchasing bottles of water, cancelling magazine subscriptions, and cutting back cable television service
Ralcorp Acquires American Italian Pasta
Ralcorp Holdings has completed its acquisition of American Italian Pasta Co. for $1.2 billion. The latter is now a wholly-owned subsidiary of St. Louis-based Ralcorp.
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“We believe this combination further strengthens our position as a diversified provider of private label and branded food products,” Kevin Hunt, co-chief executive officer and president of Ralcorp, said in a statement.
American Italian Pasta is the largest maker of dry pasta in North America. Ralcorp is the largest producer of private label foods in the U.S., and owns Post cereals.
