Another question is to ask is about VOLUME share and whether shoppers are moving to larger sizes in private label. There has been a trend towards premium vs. price-driven private labels, which will also somewhat inflate dollar growth at the expense of unit sales.

However, what is confusing to me is the 10 point spread between dollar and unit growth; that seems to defy logic and any reasonable look at price inflation over the same time frame. If it is solely influenced by dairy and eggs, then the numbers might make sense; however, that also suggests that center store non-perishable PL items ARE probably experiencing unit growth. This may be a fire and ice “average” generalization.

Understanding the data would be critical to more fully considering this analysis. Is Wal-Mart included in the data? How about clubs where they continue to increase business (especially Costco) and have a very strong PL offering. Is the dollar channel included? These key retailers have a huge impact on the total read of shoppers purchases of PL. HEB in San Antonio has a terrific PL offering and is a key driver of the results there. Conversely, NY does not have as much influence by national and global retailers that have the strongest PL offerings across the store.

I can tell you if you watch shoppers, they seem to be buying a greater mix of their total basket in PL products that span across categories when those PL products are available. Saving $$ is the shopper’s top criteria in a pinched economy and PL purchases allow them to do so effectively.

One more lesson in remembering to look at ALL the numbers before reaching conclusions. We tend to forget (unless we are in that particular business of course) that most of what is tracked as Private Label is store branded milk, eggs, meat and dairy. CPG marketers are understandably more focused on private label competitors to their own offerings. But beyond this “gotcha” blip in the reporting — there is a very real opportunity for marketers of high quality proprietary store brands to generate trial in the current environment. Whether or not we are heading into a real recession is largely irrelevant. The business opportunity here is predicated on the fact that consumers FEEL like we are in one. It’s in the news, it’s what the politicians who want to change the current status talk about. It’s what we are talking about around the water cooler! The next twelve months or so will provide what I refer to as a “Self-serve gas” opportunity. As in the eighties, when it became fashionable for the soccer mom in… Read more »

Having watched the ebb and flow of private label sales since the 1980’s I firmly believe in the following realities: The real growth of private label took place from the 1980’s through the mid 1990’s when private label grew to an estimated 18% CPG market share, up from a mere 3% back in the 1970’s. This was the era of when generics became store brands. It was the true evolution and metamorphosis of private label. Since that time, private label has made smaller gains with premium, exclusive store brands, new categories, etc. A downturn in the economy helps private label dollar sales to a certain extent because retailers tend to narrow the gap between the cost of private label and national brands. However, unit sales do not increase because for the most part consumers remain loyal to national brands that react to the economy. We will probably not see another growth era in private label as dramatic as we did in the 1980’s and 1990’s. However new channel stores like Trader Joe’s, Whole Foods, etc.… Read more »

When the retailers in the US focus on providing high-end, unique products as part of their Private Label strategy, product sales and unit volume will increase. This has been suggested for years, and yet the majority of retailers continue to focus on an NBE strategy, and promote cost as the reason for buying their PL products. When one looks at the retailers that are doing it right (Costco’s Kirkland, Trader Joes), I think Nielsen would be hard-pressed to say that their unit volumes are down. The problem is not with Private Label as a category; the problem lies in the execution of the strategy by retailers.

Private labels will continue to increase only where there is quality and price. If the sale price of a major label is better, private label will fail. Sales will continue to improve for the private label that is focused on quality and value.

We are after all, a society that identifies ourselves with brands. Is it possible to glean from this that the major brands have so heavily discounted their products that consumers can often get the name brand with all of its cache for not much more than the private label?

The simple takeaway from this is that there has been a larger percentage drop in private label unit sales than for brands, which would indicate to me that private label has lost more consumption from its traditional buyers than it has gained from its cross-over buyers. Traditional private label buyers are hurting more than the consumers who are trading down. What does this mean for a retailer? It could mean absolutely nothing, because we don’t know if it reflects a change in where people are buying the brands. If instead of buying private label in a regional market, consumers are now buying national brands at their local Wal-Mart or Costco, then the conversion of private label sales to brand sales really represents expansion of the intuitive value proposition we would expect in an economic downturn. Consumers are saving money by buying their national brands somewhere else. This makes sense, as consumers who are now visiting a new retailer are less familiar with the private label product and would opt for the familiar national brand.

This finding is a confirmation of the change in Private Label products. No longer is it just about low-end products. Considering the increase in organic/natural Private Label products, one would expect the dollars to increase. Before, due to the lower price points of Private Label, the units increased faster than the dollars. With higher quality and unique products, the dollars are closing the gap.

Far be it from me to find flaws in such a large company’s survey, so all I can do is cite our own work at RSR.

The fundamental incorrect assumption is that consumers are buying private label because they are trading DOWN. In fact, our own data shows that retailers aren’t increasing their percentage of “pure generic” private label merchandise (and yes, I agree; OTC drugs are the exception).

Retailers are much more interested in selling private label merchandise that’s on a par with national brands–just tailored to their customers’ tastes.

The move to private label is about retailer gross margin and customer preference–not low cost alternatives for consumers.

In the Nielsen study, dollars are up in Private Label, but units are down. This may be driven by retailers moving to larger sizes in their Private Label products–was this considered in this study? The important thing about Private Label that retailers need to determine is what tier (value, mid or premium) their brand plays–and this may not be consistent across all categories. In the instances where they are playing in the value tier, and if they are competing with highly discounted national brands, they need to do an analysis to understand impact on profit and sales based on different price gaps with the national brand SKUs. They may decide that they won’t be above or below certain thresholds for particular national brand items, because of the huge loss in sales and/or profit that they experience. There may be other, less price sensitive categories, where their Private Label sales aren’t impacted by price reductions on national brand items. If retailers treat Private Label the same in all categories, without considering category role & strategies, they… Read more »

I like the geographic story here. It implies that consumers in different geographies are being re-trained to buy different brands and interact with retail a bit differently. This development could also tie into the new emphasis on “localism” in food and product purchases. The implication could be that a new era of regionalism could reign.

I am among many who have been predicting this development (or lack of development) in PL for some time, so no surprise here. We have also speculated that a great deal of PL growth is the result of grocers pushing national brands off their shelves and replacing them with store brands, and not from shoppers clamoring for store brands. I would be interested in whether Nielsen has any data to prove or disprove that theory.

Not all private label is created equal. PL growth projections must segment the store brand universe by both type of product and type of private label.

The more technologically complex and proprietary the production processes, the lower the private label potential…today and forever. Commodities are the private label power zone and the Nielsen study shows that many are capping out in units and growing only by price increases.

Then private label brands must be viewed by price/value tier and by whether they are retailer’s own brand (e.g., Sam’s Choice) or a separately branded exclusive line (CVS’ Lumene). Both are growing but for different reasons and in different ways.

Gas prices are up. Money left in the wallet for groceries is down. It should not be a surprise to find Private Label sales and dollars per unit have increased. PL products have come a long way with their excellent quality in the recent years. The changing economy is leading to more trial, and the opportunity should be used as an opportunity by smart retailers.

These statistics suggest that CPG companies have done a better job of communicating their value to the customer. However, we now find ourselves in times of change. Inflation, recession and changing demographics are the realities of today. Smart consumers are more willing to rethink their purchases and will go for the option that offers most value. This is a prime opportunity for retailers to redefine their priorities and thereby their assortments. Gone are the days of offering everything to everyone. Now retailers must decide between variety and efficiency. Are 16 brands of salad dressing really a good use of space? And who is really benefiting from such an arrangement, the brands or the consumer? Retailers have long been complacent with the status quo but have thereby missed out on their potential. What good is offering a private label if it is salad dressing 17 or 18? It is in the power of the retailer to prioritize their own private labels over the brands. Retailers have too long played catchup to brands in terms of perceived… Read more »

Complete agreement on the need to understand the research model and the data constraints. I’d like, however, to make a different point. Grocery private label tends to be approached from within the existing “private label” paradigm. Others have cogently pointed out that variances exist in executing within this paradigm, primarily in the use of the product and it’s fit within the overall strategic assortment plan. Consider, instead, the model in growth mode within the mass market department store group. Competitors such as Target, Kohl’s and JCP have begun to shift emphasis from the old “private label” paradigm to an “exclusive brand” paradigm. Macy’s gross margin has been built on applying this paradigm shift to their in-house brands. These exclusive brands tend to either represent shared equity (Simply Vera, Concepts by Claiborne, Isaac Mizrahi, etc) or leveraged design expertise (American Living, Chaps, Rogan). However, in many cases, the exclusive brand has very little if any attribution to the core brand creating it. American Living is an example. What can Grocery learn from this approach? With the… Read more »

Some time ago RetailWire did an excellent presentation on Private Label. I still use the knowledge gained from that webinar for strategy.

In general, Private Label is not being properly managed. It is over SKUed. It is priced too low in many circumstances, packaging is unattractive, and it still maintains the “low bidder” mentality. Private Label Pricing drives down category average pricing, and the promotion price points of 10 for 10 and Bogo erodes the inherent profits. A well managed PL program, with quality manufacture, will maintain pace with National brands.

Lies, damn lies and statistics. Private label branding is the most profitable categories (and one of the fastest growing) in retail. No matter how you determine this, year after year returns to the bottom line, gross margin dollars or unit growth, it continues to defy averages from other categories in each of these areas. It returns more dollars and gathers a larger percentage of retail shelf space every year. What else can you say?

Private label growth is low because retailers committed to private label aren’t building many new locations. Warehouse stores, conventional supermarket chains, and mass merchants have all cut their new store opening budgets way back. The only private label fans opening lots of new stores: drug chains and Trader Joe’s.

I concur with Mr. Warady’s comments. In fact, it is a lack of retailer strategy in how to market and position private label that has led to its lack of market success. While Kirkland’s positioning and breadth of category participation serves as a good example of what a retailer can achieve, Loblaws development and execution of two private label brands in the ’80s and ’90s led to other retailers jumping on board the private label bandwagon across grocery, drug, mass warehouse and department store channels in Canada. Loblaws introduced the No Name brand at the opening price point segment and President’s Choice as a premium assortment across a multitude of categories. Separate resources, teams and budgets were designated for both private label brands, and the execution mirrored the sales and marketing efforts of other CPG national brands. Innovation was and continues to drive the President’s Choice brand. Cost leadership drives the No Name brand. The success and consumer acceptance led to a proliferation of private label brands for other retailers, with some categories enjoying 50+%… Read more »

PL is here to stay. Quality has improved tremendously; put that together with cost savings and the consumer is definitely on board. Regardless of economy PL has made inroads and I believe will continue to draw consumers in.

The center store non perishable items have the most to gain. With correct positioning and promotion it will hold its own, and most likely see continued gain.