Private label to show its worth in the convenience channel

Posted by Daniel Palmer on 3rd October 2008

Private label products, or store brands, are growing faster in convenience stores compared to other stores and represent a tremendous growth opportunity for the convenience channel, according to new research to be released by The Nielsen Company.

Nielsen’s research discovers that sales of private label products escalated by nearly 20 per cent over the last year to $826 million in American convenience stores, compared to a 15 per cent increase in drug stores (pharmacies) and just under 10 per cent in supermarkets. Overall, private label share is significantly lower in convenience stores – only 1.5 per cent – compared to a 13 per cent share of drug stores’ dollar sales and a nearly 18 per cent share of supermarkets’ dollar sales.

“Convenience stores are just starting to see the potential of private label,” Tom Pirovano, director of industry insights at The Nielsen Company, commented. “While private label dollar growth has been driven more so by higher unit prices, versus a shift from traditional brands, we do see private label unit sales up in recent weeks. The convenience channel has an opportunity to develop their own store brands using private label benchmarks at supermarkets and drug stores.”

Opportunity Knocks
Looking deeper, Nielsen’s analysis found that six out of the top-selling product categories in convenience stores, such as carbonated beverages, snacks and candy, are significantly underdeveloped in private label, representing opportunities for convenience store retailers.

“These products are generally considered strong sellers for convenience stores yet are very underdeveloped in terms of private label share,” Mr Pirovano noted. “Now, more than ever, is the perfect time for convenience store operators to expand their private label offerings. Although store brands generally deliver higher margins, private label products can also convey a value image that many shoppers are looking for during times of economic uncertainty.”

The research also identified growth of 4.1 per cent in the convenience sector in spite of the much-publicised US downturn, with convenience stores selling more beer, cigars and chewing tobacco than grocery stores, drug stores and mass merchandisers combined.