Deloitte Research: Store Brands Are Here to Stay

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September 28, 2010

In Deloitte's new study, "The Battle for Brands in a World of Private Labels," when asked how market share of store brands will change by 2012 in the United States, 77 percent of CPG executives and 90 percent of retail executives surveyed indicated it will increase or increase significantly.

While there is consensus by CPG manufacturers and retailers on continued growth of store brands, there is a disconnect between the executives’ perspectives on shoppers and consumer attitudes towards store brands. Fewer than two out of 10 executives surveyed believe consumers view store brands as likely to be manufactured by the traditional national brands, while eight out of 10 consumers surveyed believe that most store brands are manufactured by the traditional national brands.

In addition to the disconnect around manufacturing of store brands, 85 percent of consumers also indicated that they have found several store brands that are just as good as national brands and as a result have little reason to switch back.

"Though conventional wisdom has co-branding between retailers and CPG companies as a win-lose proposition, the results of our study indicate that nearly half of retail and CPG executives agree that working together may be the best way to win the wallets of the 'new consumer,'" said Pat Conroy, vice chairman and Deloitte's U.S. consumer products practice leader. "What they need to consider are variations on current brands and what new innovations should be brought to market so as not to overwhelm an already substantial marketplace."

There is a fine line that needs to be followed by both CPG companies and retailers as both sides believe consumers have unique associations with national brands compared to store brands. While price and product performance are table stakes, the executives surveyed feel consumers are much more likely to associate innovation with national brands, and local variants, such as taste and specific regional preferences, with store brands.

Those areas that the executives felt consumers did not have either a strong national brand or store brand specific association were: exclusivity, green (organic and environmentally friendly products) and supportive of social causes.

Retailers polled believe CPG companies need to develop retailer-specific portfolios and more low-end brands, a well as local variations to better appeal to consumers in target cites, states, or regions, which would increase market share.

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