Nielsen: Private Label Outlook is Sunny

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February 7, 2012

The recession could be considered a windfall for private label programs, stimulating consumer interest and building strong store brands particularly in commodity-driven categories.

Store brands have achieved mainstream status among most consumers by narrowing the price and quality gaps that once demarcated nationally advertised brands and private label, according to Nielsen’s new Private Label Outlook. Two reports, one for the U.S. and another for Canada, take an in depth look at the private label industry during the recession with a look at future growth opportunities.

Since the end of 2008, private brand share growth has flattened as brands stepped up their promotion support and innovation efforts. Still, the industry is exiting the recession with new challenges and opportunity.

Store brands may now be overdeveloped in commodity-driven categories. Retailers can and should respond by venturing into new categories such as health and beauty care, and alcoholic beverages. “By applying a new rigor to the store brand management process, retailers will borrow a page from the national brand playbook, continuing to grow their private label offerings guided by consumer research, product innovation, tiered pricing (for some) and proactive brand teams,” states the report.

A survey of shoppers revealed that:

• Store brands quality now ranks “as good as” [65 percent of consumers agree] or “some higher quality” [38 percent agree] than national brands;
• Store brands dollar sales grew 21 percent from calendar 2007 through the 52-week period ending Oct. 1, 2011, while national brand sales grew by only 3 percent;
• On a dollar share basis, food is the strongest channel for private label development, registering a 19.4 share versus 17.8 for the combined food, drug and mass-merchandise universe; and
• There has been much greater private brand development in food and non-alcoholic beverage departments, but some retailers are venturing out into new territory.

There are differences among ethnic and age groups, according to Nielsen. Hispanics display the most positive attitudes toward store brands among U.S. ethnic groups, representing a high-growth, high-potential private label segment. And Gen Xers outspend the U.S. average on store brands while up-and-coming Millennials report the most positive attitudes and dollar share toward private label offerings.

Retailers and private label manufacturers need to manage the price gap between private brands and CPGs in order to clearly communicate quality and value messaging and to capture margin. There’s a real opportunity, according to the report, for store brands to expand assortment across price tiers in addition to new product categories.

Read These Related Articles:

• Report: Second-Tier Store Brands Poised For Growth
• Nielsen: Global Private Label Phenomenon is Here to Stay
• Research: Consumer Frugality Persists in the Post-Recession
• Nielsen Forecasts Long Growth Pattern in U.S. Store Brands
• Supervalu Exceeds Private Label and Earnings Expectations in Q1

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