Research: Store Brands Will Be a Retail Bright Spot in 2012

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January 3, 2012

There is strong growth projected for store brands this year, particularly in over-the-counter medications and value-priced products.

As the economy continues to sputter, U.S. households continue to be pressured to make choices based on budgetary concerns, according to Auriemma Consulting Group’s Cardbeat market research.

“The U.S. consumer market is eroding into an hourglass shape, with more migrating into the high and low ends,” according to Dr. Patricia Sahm, managing director at ACG explained. “Many consumers in what remains of the middle and the low-ends of the market appear willing to trade down on everyday essentials in order to splurge on discretionary purchases. Indeed, sales growth for store brands has consistently outpaced the sales growth for national brands since early 2008.”

Store brands aren’t likely to give up those gains, even if the economy improves, according to Christian Sessing, CFA and senior equity analyst at AMI Asset Management. “Many private label products in the grocery store tend to do well during rough times, only to give back those share gains in the good times as consumers turn back to their brand,” Sessing told the Wall Street Transcipt. “But what we've seen in the store brands -- in medicines in particular -- is there is less of a stigma to buying a (store) brand ibuprofen.”

Increasingly, national brands in the OTC category carry little to no status, said Sessing, noting that brand names in food categories do still carry cache with shoppers, but national brand names in OTC drugs have seen that cache eroded. “In food products or other private labels, there may still be that desire to buy Heinz ketchup versus buying Kroger brand ketchup,” said Sessing. “But in the store brand medicines, we don't see that. We think that there is still quite a low penetration of consumers using store brands, and we see that only accelerating, because we think consumers are catching on that they can buy store brands with the exact same ingredients for substantially less.”

Penetration of private label products in OTC is expected to accelerate in 2012, outpacing growth for CPG products in the category, Sessing predicted.

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