Through a special arrangement, what follows is an excerpt of a current article from Private Label Buyer, presented here for discussion.
With its market share rising dramatically during these past two years, private label represents a major opportunity for retailers - and a major threat to the national brands.
Faced with high food prices and other economic pressures, consumers increasingly have been opting for private label products. In fact, private label share has risen "dramatically" during the past two years, said Information Resources Inc. (IRI), in a new report.
And the Chicago-based market research firm doesn't anticipate a stampede back to the national brands once the economy improves. In "The 2009 Private Label Report," IRI said it expects this trend "to continue through 2009 and beyond, representing an unprecedented opportunity for retailers and a threat for branded manufacturers."
That said, IRI did note that some categories (e.g., cream cheese/spread and refrigerated entries) represented especially strong private label growth opportunities, while others (e.g., personal care) faced tougher competition from national brands. But all in all, IRI said, consumers are embracing store brands.
In fact, the IRI study found that 80 percent of shoppers exhibited positive attitudes toward private label in 2008, versus 73 percent in 2007. Moreover, four out of five shoppers now are "sold" on private label quality, IRI reported, indicating that product marketing during the current recession is successfully expanding the positive reputation and reach of these products.
Private label penetration does vary by region, IRI noted, with the highest private label market share (25.2 percent) being in the West, and the lowest (19.2 percent) being in the Northeast.
But Brent Baarda, director of consulting & innovation for IRI, told eReport that retailers - not shoppers - are driving the regional differences. For example, he said the Western region (excluding California) is home to some regional and national retailers with very strong private label programs. In contrast, the Northeast is more fragmented.
Speaking of regional retailers, Mr. Baarda pointed to Publix, HEB and Wegmans as three supermarket chains that are doing a terrific job in managing their private label products as true "private brands." They are using these products not only to differentiate themselves from the pack, he said, but also to draw people into the store.
Mr. Baarda expects consumers to keep reaching for private label post-recession, particularly in hot spots such as refrigerated meal solutions and some commodity-type dairy segments.
"Shoppers are telling us that they view private label quality in a better light than they did even two years ago," he said. "I see no reason to believe that progress will reverse itself."
Discussion Question: How will private label development continue for the remainder of the economic downturn? Can you come up with some categories particularly positioned for private label expansion? How should national brands be responding?