It is not surprising that the great recession saw an upswing in the use of private label in the United States. Retailers looked to private brands to provide shoppers greater value and to increase margins. But since the end of 2008, growth in private label across the three combined food, drug and mass retailer channels has been fairly flat as brands stepped up their promotion support and innovation efforts. So was the short-lived success of private label a flash in the pan or can we expect continued growth in years to come?
Size Matters
Make no mistake, private label plays a significant part the US retail landscape. Sales of private brands are now over US$100 billion which is 14% greater than calendar year 2009. This compares to brand sales which are now over $510 billion having grown by around 5.7% since calendar 2009.
Changing Perceptions
With increased focus on premium private brands, more consumers now claim that the quality of some private label products is higher than some name brands. Additionally, fewer consumers think that private brands are for people on tight budgets who can’t afford the best. And, according to the same research by Nielson, only 11% of households feel uncomfortable serving private brands to guests.
Channel and Department Differences
According to the Nielson report, just under one in five dollars spent at supermarkets is from private label. Drug stores have about 15% of dollars spent on private label while convenience stores are a tiny 2.5%. Remaining channels average out at about 14%. For the latest annual period, private brands dollar sales reached a 17.2% share, up 0.3 share points from a year ago. However, this means that branded products still drive the vast majority (83%) of dollar sales. Private brands dollar shares range from a high of 37% in the dairy department to a low of 1% in alcoholic beverages.
Demographic Changes
Private brands have broad demographic appeal that stretches across income, age and gender groupings. However, most categories are under-developed among multicultural households, providing opportunity to create future product demand by taking advantage of demographic change. The opportunities are immense, when you consider that if Hispanics (buying power) were a standalone country, they would be the 12th largest economy in world, right behind Mexico. African Americans would be the 17th largest economy right after the emerging market economy of Turkey and Asian Americans the 27th largest economy.
Quote:
Success is not final, failure is not fatal: it is the courage to continue that counts.
Winston Churchill
Author:
Ian Smith
CEO – Access USA Pty Ltd
0417 020 429
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