Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
A Nielsen review of department-level price gaps between store brands and manufacturer brands shows that retailers may be hurting themselves in the long run -- and missing out on opportunities to collaborate with manufacturer partners to drive stronger category sales.
Within U.S. food, drug and mass merchandisers (including Wal-Mart), Nielsen found considerable price gaps between store brands and manufacturer brands, with store brands in dairy as much as 50 percent lower. What's more, price gaps are growing in most departments.
Are you losing category dollars because of aggressive store brand pricing or greater focus on store brand versus brands? Department level price gaps can be driven by differences in category mix, brand and/or size mix, so examining gaps by category and SKU is wise.
An increase of just one cent in store brand prices translates to roughly $400 million across all departments measured by Nielsen. In departments and categories with extreme price gaps, the potential to enhance category sales can be significant. With the ongoing price compression causing declining category and same-store-sales, you may be wise to think about raising prices on some of your own brands.
Price is top of mind for all retailers, but Nielsen's annual Shopper Trends study reports that strong shopper relationships are built on at least four other equally important factors. As the economy improves, these factors will separate the strongest grocery retailers even further from the pack. The U.S. shopper survey, including feedback from over 29,000 shoppers across all 48 contiguous states, found that the most successful retailers complement pricing strategies with a strong commitment to other shopper needs. This helps them build a stronger platform for long-term success.
The five over-arching areas that the study identified contributing relatively equally to shoppers' emotive equity are:
1. Store accessibility2. Store format and wide selection
3. Pricing and value for money
4. Stocking quality products
5. Efficiency and loyalty program
The importance of these other factors also explains why not all shoppers are doing their weekly grocery stock-up in discount chains, despite the pressure of a recession. Consumers still want to have a pleasant experience and there is tremendous value in making that process convenient and easy for them.
Discussion Questions: Do you agree that retailers are losing category dollars because of aggressive store brand pricing or placing greater focus on private label versus national brands? What should be the ideal pricing gap between store and national brands? What's the best way for retailers to "mind the gap?"