SymphonyIRI: Private Label Share Under Pressure

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October 11, 2011

Store brands are growing in popularity but some categories are feeling the pressure of rising prices as share of private label products slip, according to SymphonyIRI Group’s latest Times & Trends Report, “Private Label: Brand Positioning in the New World Order.”

“At nearly 23 percent of CPG unit sales across retail channels today, private label products certainly have momentum and command a sizeable share of consumers’ CPG spending,” said John McIndoe, senior vice president of marketing, SymphonyIRI Group. “However, this momentum is not demonstrated equally across channels, retailers, departments or categories. This means there is room for private label and national brand manufacturers to capitalize on opportunities."

The success of many store brands has been built on price -- offering a value-priced comparable alternative to national brands. But this strategy is no longer enough to grow private label market share, according to the report. It's time for retailers and private label manufacturers to think outside the box.

SymphonyIRI advises retailers seeking to grow private label share to consider the following actions:

• Identify and assess store brand opportunities and threats. Tailor store brand offerings at the market level; support private label lines with consumer-centric and highly integrated marketing campaigns, including in-store display and feature ad support.
• Refine private label development strategies. Evaluate feasibility of multi-tier offerings across key categories/product lines, either alone or in partnership with national brand manufacturer partners.
• Measure and monitor actual versus planned impact of private label related initiatives. Test market product, pricing and promotion changes prior to and immediately following roll out; track and benchmark store-level store brand share shifts relative to national brands.

“Both manufacturers and retailers know that private label is not a panacea,” said Susan Viamari, editor of Times & Trends. “Private label products remain, on average, 29 percent lower priced than national brands. Remove that price advantage and dollar and unit sales could plummet."

Private label price hikes have been higher than those of national brands, according to the report, which removes the price advantage and places pressure on store brands to deliver in other ways. Going forward, private label products will be subject to the same commodity price increase pressures as national brands, so establishing and maintaining effective pricing and promotion strategies should be top of mind for every marketer today, Viamari advised.

Share Gains and Losses
Private label share is largest within the grocery channel, however share of sales slid 0.6 points during the past year. Within the drug channel, private label share of sales fell sharply during the past year. Some of these declines occurred in health-related categories, with share of vitamins and internal analgesics falling by 3.2 points and 4.4 points, respectively.

Sizeable drops also occurred in the beauty department in the drug channel where private label share fell more than 5 points in both soap and blades categories. These declines are noteworthy because they occurred in departments that are generally strongholds for drug retailers.

Private label has an above average and growing presence in 30 of the top 100 CPG categories. The most sizeable private label share increase came in the refrigerated salad/coleslaw category, which has jumped more than 20 points during the past three years. In the drug category, gastrointestinal tablets, cold/allergy/sinus tablets, internal analgesics and pastry/doughnuts are also doing well.

In six of the top 100 CPG categories, private label share is above average, but national brands are winning share of spending. The pasta category is one example with the largest decline in private label share thanks in part to innovation such as whole grains and added nutrients that has brought some level of differentiation to the category. Frozen seafood, pickles/relish/olives and moist towelletes are also seeing national brands drive down private label spending.

Read These Related Articles:

• Store Brands Are Retailers' Second-Most Important Point of Difference
• Research: Consumer Frugality Persists in the Post-Recession
• Nielsen: Global Private Label Phenomenon is Here to Stay
• Price Study: PL Saves Shoppers Upwards of 33 Percent
• Deloitte Research: Store Brands Are Here to Stay

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