Tuesday, December 18, 2012

National Brands Gaining on Private Label: New Report

The struggling economy hasn’t been the only reason for the success and growth of private label products in recent years. Improved quality is another important reason. Not surprisingly, retailers have intently focused on growing their store brand programs. 

Meanwhile, national brand manufacturers haven’t exactly slinked into the corner. They have developed strategies to protect their brands from private label encroachment by offering new value, quality and innovation. These efforts have been producing results, evidenced by private label share losses across many CPG categories and channels during the past two years.

That is the key finding from research by SymphonyIRI and presented in a new report: Reversal of Fortune: National Brands Pick up Gains on Private Label.

Using SymphonyIRI’s newly released total U.S. multi-outlet geographies for the first time, a recent edition of its Times & Trends report digs even deeper and broader into private label trends than previously. The new coverage brings perspective on Walmart, military commissaries and select club and dollar retail chains to the traditional food, drug and mass outlet coverage of earlier scanner data-based reports.

“Signs that private label may be hitting a proverbial glass ceiling have emerged during the past couple of years,” says Daniel Grubbs, principal, Symphony Consulting, SymphonyIRI Group. “While private label has made some impressive gains, our new report reinforces the fact that private label has entered a phase where there are pockets of growth among categories and retailers, rather than a general expansion. Private label’s success still relies heavily on price discounts, and private label purchases are quite concentrated among a minority of shoppers.”

Shopper Patterns
The following is a glimpse of the share trends, purchase segments, and discounting and merchandising analyses found in the Times & Trends report:

  • Share Trends: Penetration continues to be a key influencer of private label share. Penetration has slid across most CPG channels during the past two years, with the exception of the club channel, which has seen private label penetration increase more than one point since 2010, to just under 43%. Penetration gains are also helping to support growth at the category level, including categories such as internal analgesics and refrigerated salad/coleslaw, where private label share has historically been above average. 

  • Purchase Segments: Private label sales are quite concentrated. At present, the top one-third of private label buyers account for nearly two-thirds of all private label sales. And, while overall private label penetration is nearly universal, private label penetration is below 25% across three-quarters of CPG categories. 

  • Discounting and Merchandising: Average savings offered by private label CPG options varies considerably, but, on average, is in the double-digit range across more than three-quarters of the largest CPG categories. Despite the measurable discount offered by many private label CPG products, the last two years have witnessed a growing average private label price per volume and a declining private label price gap versus the category as a whole. 

Category Opportunities
Private label unit share trends were mixed across most departments during the past year, evidence of the resolve and deftness of retailers and name brand manufactures in serving consumers on an unwavering pursuit for value. Private label boasts above average and increasing share across 19 of the 100 largest CPG categories. Across a strong majority of these categories, penetration is on the rise, in some instances substantially. Private label is “up and coming,” with share below average but on the increase in 41 of the 100 largest CPG categories. The up-and-coming category showing the largest private label jump hails from the snack aisles, where private label currently holds a 12% share of dollar sales and 17% of volume sales. While this figure has been largely flat during the past year, several snack categories are seeing private label share grow. 

Private label share is on the decline in 40 of the 100 largest CPG categories. In these categories, innovation is often playing a key role in thwarting private label in-roads. Price is also a key influencer of trends in this area and is critical to monitor in the coming weeks and months, as private label prices are rising more quickly versus industry average. 

“National brands have clearly gotten the message from their private label competitors: providing consumers low prices and, more importantly, solid value, will drive sales and share gains,” concludes Susan Viamari, editor, Times & Trends, SymphonyIRI. “Marketers from both sides of the table are working to establish balance in their co-dependent relationship and serve consumers well. The key to success is the ability to provide perceived and real value for consumers in all life stages and circumstances.”


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