Nielsen: Less is More -- Are Store Brands Exempt?

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October 15, 2009

As pressure mounts on manufacturers to reduce product assortment on retail shelves by as much as 30 to 40 percent, three Nielsen experts ask if store brands should participate in the same efficiency exercise.

"While this may seem counterintuitive, retailers should consider cutting their own selection in favor of national brands in some categories to bring consumers to their stores," wrote Rob Schram, Brian Ruggiero and Nan Schoenleber - vice president of assortment, client manager and project manager respectively, in an article published in Progressive Grocer." Having the appropriate balance of store-brand items in each category not only satisfies consumer demand for store brand and branded items, but also allows production costs/profits to remain manageable for the retailer."

Store brands achieve 20 percent of dollar sales with only 10 percent of the assortment on shelves and their turn rates are more than two to one, Nielsen data shows. "While it's true that consumers do want store brands, they just don't require every flavor or size iteration that exists in the branded equivalence. Retailers should focus more on ensuring they have the correct out-of-stock requirements for their top items instead of launching many additional store-brand SKUs. The key to growing store-brand sales is being strategic and hitting the right categories."

Category growth contenders include milk, flour, tissue, foil, bottled water and tea "where manufactures have eroded brand equity."

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