Private label as familiar and relevant as brands in some categories?

Posted by Daniel Palmer on 26th April 2009

Private label share has risen dramatically across retail channels and product categories during the past two years as consumers struggle with high food prices and other economic pressures, new research from America has indicated.

According to the latest research from Information Resources, Inc. (IRI), “The 2009 Private Label Report,” this trend is expected to continue through 2009 and beyond, representing an unprecedented opportunity for retailers and a threat for branded manufacturers.

“With budgets strained to the breaking point, shoppers are scrambling for ways to save money,” IRI Consulting and Innovation President Thom Blischok noted. “Shoppers are looking through a lens of affordability and have a re-invigorated interest in private label since the economic turmoil began. The need for affordable packaged goods solutions is high, and private label products are going a long way toward answering that need.”

“Since many private label products are truly becoming mainstream these days, IRI refers to these products as private brands, such as Target’s Archer Farms, Safeway’s O Organics and Supervalu’s Wild Harvest to name a few,” Mr Blischok explained. “The retailer halo is now foundational, and private brands are becoming as familiar and relevant as national brands in some categories.”

The report discovered private label’s strongest growth performance tended to be in such categories as cream cheese/spread, paper napkins, refrigerated entrees and shortening and oil. While pet supplies, cold/allergy/sinus tablets, refrigerated salad/coleslaw and salad dressings were listed as developing categories. In personal care categories, branded manufacturers have successfully differentiated themselves in the minds of shoppers, which has made it difficult for retailers to successfully penetrate these categories with private label.

Four out of five shoppers in America are now “sold” on private label quality indicating that product marketing during the current recession is successfully expanding the positive reputation and reach of these products. This figure is up from 73 per cent in 2007, although dollar and unit shares in the US have not risen dramatically – still hovering below 25 per cent. In Australia, private label has closer to 22 per cent of the market.

“The evolution of the U.S. private label market has accelerated in the face of growing financial turmoil,” Sean Seitzinger, senior vice president, IRI Consulting and Innovation, concluded. “As shoppers opt out of some products and stores, they will opt into others. It is critical for the ongoing success of CPG manufacturers and retailers to not only react to, but anticipate these trends and be ready with products, assortments and store layouts that meet the shopper’s changing needs.”