Study: Private Label Dollar Growth Misleading
National brands may have less to worry about when it comes to private label than previously thought.
New research conducted by The Nielsen Company (a RetailWire sponsor) shows that while private label dollar sales in food, drug and mass continued to grow over the past year, unit volume was actually down.
"When private label dollar share started to spike, it appeared that shoppers were shifting to store brands in order to save money," said Tom Pirovano, director of Industry Insights, The Nielsen Company. "That’s always been the conventional wisdom during economic downturns. Digging beyond the numbers, however, it’s clear that private label unit share is essentially flat. Higher prices in commodity categories like eggs, milk and cheese are driving private label dollars, not consumers deserting traditional brands."
According to Nielsen, top sellers in private label tend to be commodity items with low margins that are susceptible to increases in the price of fuel and raw materials.
The importance of private label is also directly affected by geographic location. San Antonio has the highest share of store for private label at 25.6 percent. In New York, conversely, store brands only have a 10 percent share.
"Market consolidation appears to be an important indicator for private label share," said Mr. Pirovano. "San Antonio and other top markets for private label are dominated by just a few major retailers. New York and other markets with lower private label share, however, have several smaller grocery chains with less opportunity to establish shopper loyalty for retailers or their brands."
The experience of retailers in markets where private label is strong points to the opportunity for store brands to drive both top and bottom line growth for merchants.
"As prices continue to rise, private label products can be leveraged by retailers to entice consumers into the store and increase sales," said Mr. Pirovano. "Knowing what your consumers want is essential for developing your private label strategy. Do your customers want to save money with in-store brands? Are your customers willing to buy higher-end and more expensive private label products? In a challenging economy, private label products can serve as ‘destination’ products that truly differentiate your store from competitors."
Discussion Questions: What is your takeaway from Nielsen’s new dollar sales and units numbers for private label and brands?
- Nielsen: Higher Unit Prices, Not Volume, Behind Rapid Growth of U.S. Private Label Sales – The Nielsen Company