Store brands sales climbed in the Mass channel in 2016; dollar and unit volume grew four times the rate of national brands

When it comes to store brands growth, the Mass Merchandisers channel was the big winner in 2016.

Store brands expansion in U.S. grocery outlets during the past decade has been steady and widespread. Tens of billions of dollars of incremental sales of private label products have flowed into all retail channels of trade and altered the competitive balance in the marketplace.

But the most powerful expansion is occurring in the Mass channel, which now accounts for one-third of all store brands sold in the country, PLMA estimates.

Data for 2016 from Nielsen affirms the continuation of this trend. For the 52-week period that ended December 24, 2016, retailers’ brands grew at four times the rate of national brands in the rapidly-expanding Mass channel of Nielsen’s Total Outlets database, which includes major retail operators such as Wal-Mart and Target, as well as participating warehouse clubs and dollar store chains.

Private label dollar volume in Mass climbed +4.6%, or $2.2 billion, to $49.6 billion, compared to an increase of only 1.1% for national brands; resulting in a +0.5-point market share gain to 16.6%. Total sales of all brands in the channel rose to nearly $300 billion, an increase of 1.7%, or $5.2 billion, a gain significantly driven by store brands.

A similar pattern emerged in the calculation of units sold, with private label advancing +4.4% or some 700 million units, compared to only +0.2% for national brands. As a result, private label’s market share moved up +0.6 of a point to 19.7%. Overall, units were up 1.0%, or 800 million, overwhelmingly due to store brands’ performance.

An ongoing success story

The Mass channel is an ongoing store brands success story. Over the last two years alone, store brands dollar sales in the sector have increased by $4.7 billion, a gain of 10.5%; while store brands unit sales have gone up 1.2 billion for an improvement of 8%.

These latest results are especially important because overall sales for Mass are climbing at a much greater rate than in the Supermarket channel. In 2016, dollar volume sales for Nielsen’s all retail outlets combined segment, which also includes drug chains, outpaced the supermarkets-only measure, increasing +0.8% compared to barely a +0.1% growth for supermarkets.

As a result, store brands’ market share for the year declined in the slow-growth supermarket channel – coming in at 18.4% dollar share and 22.3% unit share – as well as in Nielsen’s All Outlets calculation, but the data clearly indicate that, separate from the adverse impact of supermarket numbers dragging down overall private label results, market shares for retailer brands in the other outlets, particularly Mass, have experienced solid gains at the expense of national brands.

Private label’s advances in Mass and other non-supermarket channels is also an important factor when estimating the total size of the private label market in the country. While Nielsen reports total private label sales for 2016 at $118 billion, these results do not include sales from some of the biggest and best store brands retailers in the country, such as Costco, Aldi, and Trader Joe’s. Estimates of their private label sales would add another $35 billion to the total and push the U.S. store brands market to more than $150 billion.

Also, not included are store brand products sold by chains specializing in office supplies; hardware, tools and do-it-yourself; home improvement, home decor and domestic goods; consumer electronics, baby care, pet care; health and beauty, and personal care. These are just a few of the non-grocery retail channels that are marketing a growing variety of store brand lines and items.

Other channels in 2016

Looking at the full-year results in Nielsen’s All Outlets Combined database, which compiles the Food, Drug and Mass channels, the changes in both dollar and unit sales during 2016 were nominal.

Store brands sales eased 0.7%, or off about $800 million on $118 billion in total sales; and store brands dollar share slipped to 17.5% from 17.7%. The result in units was much the same. Store brands gave up 0.4%, or about 200 million, in units, and its share edged slightly back to 21% from 21.1%.

Nielsen reports store brand dollar and unit shares annually for the combined outlets in nine regional divisions throughout the U.S. The results from region to region were uneven for 2016 as store brands gained dollar share in four of the divisions, held even in two, and lost ground in three. The regions with the highest store brand dollar penetration were in the East South Central and Mountain, both at 19.4%. Sectors with highest dollar share were in the West North Central and West South Central, followed by New England and the Middle Atlantic.

In unit share, two divisions were up, two were even and five fell. Again, the highest store brand penetrations were in the East South Central, at 22.7%, and Mountain, at 22.6%. In units, as in dollars, the West North Central and West South Central divisions saw strong gains.

One in 5 items sold in supermarkets a store brand

It was a difficult year for the Supermarket channel overall and for store brands in particular. The total channel was virtually flat in sales, with only a 0.1% increase, or about $400 million in added dollar volume over the prior year. Store brands gave up 4.6% and national brands gained only 1.2%. Store brand dollar share slipped to 18.4%.

Overall unit sales were down by o.4%, or about 500 million, vs. 2015. Store brands declined by 2.9% and national brands gained only 0.3%. Store brand unit share, an important industry benchmark, still came in above the 22% mark, so again more than one in five items sold in the vast channel was a store brand.

Drug chains also had a challenging year with overall dollar volume off slightly and units down sharply. This represents a significant change in a channel that has enjoyed robust growth for most of the last decade. Overall dollar volume was off o.1% as store brands were down 1.3% and national brands were up only 0.2%.

Total channel sales came in at $50.5 billion, the same figure reported by Nielsen in 2015. Store brand dollar share was shaved slightly, to 16.5%. In unit sales, both store brands and national brands fell hard: Store brands were off 5.4% and national brands were down 2.4%, producing an overall channel decline of 2.9%. Store brand unit share dipped to 16.8%.

Hot categories for store brands growth

Nielsen annually provides a list of the top ten categories for store brands dollar and unit sales growth in each channel. It offers an interesting snapshot of where opportunistic store brand innovation and development are taking place.

In All Outlets, Nielsen’s all-inclusive database, the leading store brand dollar volume gainers were a variety of food and non-food categories: Canning & Freezing Supplies; Shaving Needs; Computer & Electronic Products; Buckets, Bins & Bath Accessories; Light Bulbs & Telephone Accessories; Watches & Time Pieces; Coffee; Spices, Seasoning & Extracts; Baby Food and Kitchen Gadgets. In unit volume gains, the top ten were Shaving Needs; Baby Food; Buckets, Bins & Bath Accessories; Light Bulbs & Telephone Accessories; Fresh Eggs; Bottled Water; Lawn & Garden; Tobacco & Accessories; Coffee, and Hair Care.

In Supermarkets, the top dollar gainers were predominantly non-food sections: Seasonal General Merchandise; Candles, Incense & Accessories; Women's Fragrances; Fresheners & Deodorizers; Batteries, Flashlights & Chargers; Baby Food; Spices, Seasoning & Extracts; Total Grooming Aids; Buckets, Bins & Bath Accessories and Bottled Water. In units, many of the categories appeared again: Candles, Incense & Accessories; Baby Food; Bottled Water; Coffee; Vitamins; Gloves; Batteries, Flashlights & Chargers; Refrigerated Dough Products; Spices, Seasoning & Extracts, and Fresh Eggs.

Food a winner in the Drug channel

Looking at the Drug channel, food sections comprised the majority of leaders in dollar volume gains: Tea; Salad Dressing, Mayonnaise & Toppings; Pickles, Olives & Relishes; Shortening & Oils; Cottage Cheese, Sour Cream & Toppings; Fresh Produce; Computer & Electronic Products; Men's Toiletries; Prepared Foods - Dry Mixes and Light Bulbs & Telephone Accessories. It was much the same among top unit gainers: Tea; Cottage Cheese, Sour Cream & Toppings; Pickles, Olives & Relishes; Breakfast Foods; Light Bulbs & Telephone Accessories; Canned Vegetables; Fresh Produce; Shortening & Oils; Ice, and Household Supplies. 

In the Mass sector, several of the fastest-growing categories in other channels are listed along with two alcoholic beverages sections. For store brand dollar volume gains the top category was Beer followed by Fresh Eggs; Shaving Needs; Canning & Freezing Supplies; Liquor; Coffee; Buckets, Bins & Bath Accessories; Watches & Time Pieces; Spices, Seasoning & Extracts, and Hair Care. In store brand unit gains the group was largely identical: Fresh Eggs; Shaving Needs; Liquor; Baby Food; Tobacco & Accessories; Bottled Water; Light Bulbs & Telephone Accessories; Butter & Margarine; Hair Care; and Buckets, Bins & Bath Accessories.

Providing value to consumers

Store brands continue to represent outstanding value to the American consumer.

IRI estimated at the end of 2016 that shoppers could save $44 billion per year buying private-label products over national brands. In addition, “store brands are increasingly viewed by retailers as a profit driver and point of differentiation, because they require lower inventory investment and achieve turnover that is generally on par with national brands.”

“Growth in the private label industry surged during the recession as consumers looked to maximize purchasing power. Private label’s ability to maintain share as the economy improved is a reflection of consumers’ positive attitudes toward the products.” Continued IRI, “more than 80% believe private label offers as good as or better quality than the national brand counterparts.”

In its report, “The Future of Private Label Food,” the Hartman Group said: “What millions of shoppers have discovered is that brand may not matter as much as they have traditionally felt, especially in packaged-food. The ability of retailers to move their store brand portfolios upmarket; enhance quality and pricing, and leverage a strong banner halo will determine how prevalent private label becomes.”

“Consumers continue to look for ways to save money," a report from McKinsey added. “During the recession, consumers saved by switching to store brands. Consumers are not returning to higher-priced options. One-third no longer prefer the more expensive national brand, having realized that the store brand offers better value for the money and is of higher-than-expected quality.”

Retailers capitalizing on store brands popularity

In response to consumer demand, retailers across the country are freshening and extending existing private label offerings and bringing to their shelves whole new lines of store brands to leverage evolving lifestyles and desirable product attributes, and to stay competitive with the rival down the street and its own popular store brands. Retail chains know that private label products are a foundation for higher customer loyalty and stronger profits.

Many of the most successful retailers of the past decade have positioned store brands as their linchpin strategy. Chief executives are unstinting in their praise for the role store brands plays in their chains’ success. They understand store brands build relationships with a variety of unique and profitable targeted customers.

Many consumers are enticed to trade up to premium or super premium products while remaining a loyal customer of the chain’s tried and trusted, basic store brand line. Mintel’s “2017 Private Label Food Trends: U.S.,” said “opportunities for retailers to elevate the perception of their store brands will come through product innovation, sampling, and increased ingredient transparency.”

As store brands move into the next phase of growth, drivers of expansion will continue to be a good consumer experience with a product, which is often carried over to patronage of the chain’s store brands in other categories; and positive word of mouth from fellow shoppers directly or through social media with respect to quality, innovation, performance and value.

 

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