The store brands beat goes on. The latest annual statistics demonstrate that last year was another good year for store brands and despite the extraordinary gains of the last few years, sales increased once again.  

Latest Sales Figures

Market share results were impressive. In supermarkets, sales of store brands increased by over 2% and in drug chains they were up about 5%. In each of these two mainstream channels, private label dollar share, a key indicator, rose to an all-time high.

Over the past decade, annual sales of private label products have increased by 40% in supermarkets and by 96% in drug chains.

Taking a broader view of the last year’s performance, in all U.S. retail outlets, including discounters and Wal-Mart Stores, store brands increased by nearly 2% while dollar share advanced by almost half a point. Overall sales were $88.5 billion, another new record. Store brands now account for almost one out of every four items sold in the country’s supermarkets, drug chains and discount stores, according to The Nielsen Company.

While those results are compelling enough, an even more accurate sales figure for all private label food and non-food grocery sales in the U.S. would be far higher. There was an estimated $15 to $20 billion in private label sales in channels that are not traditionally counted, such as warehouse clubs, limited assortment/box stores, convenience stores and dollar stores, producing a grand total that exceeded $100 billion during 2010.

Categories Lead the Way

Private label performance is not monolithic, of course. Examining the results in individual categories offers a better sense of how store brands are doing. During 2010, store brands gained in dollar share in almost two thirds of all categories in supermarkets. In unit share, private label was up in half of all of the channel’s product categories.

Some of the fastest-growing individual categories for store brands tend to be on the perimeter, in the cold case and in the freezer, categories that last year accounted for several billion dollars in annual private label sales. Only a few years ago, these supermarket categories were considered unbrandeable, they were bereft of brands of any kind. Today, expanding retailer brands are commonplace and are a major player in the sections. As health and wellness concerns grow, so should these categories.

Some of the better performing non-food categories in 2010 were pain remedies, cough and cold remedies, first aid, and paper products.
 
This kind of category growth is expected to continue after the recovery takes hold. “Store brand grocery items have become increasingly popular across many product categories, and the trend is not likely to diminish in the future,” according to Consumer Edge Research, which surveyed more than 2,500 households and rated 90 categories based on the likelihood consumers will continue to prefer the private label versions as the economy improves. Major food and household products companies have the highest potential to lose share to private label in the future.

The center store is well-represented on the list of categories in which consumers are most likely to continue to prefer store brands: such as, milk, cooking oil, bleach, paper napkins, spices, liquid hand soap, canned vegetables, paper towels, cheese and trash bags. Also, sliced/packaged bread, canned tomato products, jams/jellies, cooking storage bags, snack nuts, ketchup and condiments, cough and cold medicine, canned/jarred fruit, dry seasoning mixes and facial tissue. Other categories with high consumer satisfaction include crackers, ice cream, orange juice and toothbrushes.

Store brands retain recession-driven gains

Recessions often force consumers to test new purchasing habits. For consumers, good results with store brands during those difficult periods invariably breed familiarity and then loyalty to the products and the stores that sell them. While some consumers do return to brands they had been buying before the recessionary period, a large percentage stay with their new private label choices. Sales data and consumer behavior from previous U.S. recessions bear this out.

Consumer Edge agrees with this belief: “The recent recession drove more households to try private label, and for those categories where the satisfaction is high, consumers are saying ‘I like the performance and don't need to rush back to the branded offering I was using before.’”

The firm said the economy is not the only driver of store brands’ recent success, which it predicted will continue well into the future. “The economy is only one factor. If we look back five or ten years ago, there’s been a long-term upward trend in household penetration for private label across the CPG space. Retailers’ investment in upgraded product quality along with additional merchandising and space are also contributing to store brand growth.”

It reinforced the expectation that sales of store brands will continue to rise over time. “Economic downturns are not the primary factor driving the trend. Instead, it is that increasingly value-conscious consumers are recognizing a good deal when they see one, and they are happy with the quality of today’s store brands. Another factor is product innovation, which can capture consumer dollars with new products.”

The future: consumers and store brands

Sales data offers an objective view of the health of store brands. For a subjective assessment the best sources are consumer opinion surveys. For 2011 and beyond, consumers are already giving strong attitudinal signs they intend to stick with store brands.

A 2011 study by GfK/Roper for PLMA that asked consumers how they feel about store brands revealed some interesting shopping behavior:

•A majority of consumers continue to purchase store brands “frequently.” More than half say they buy the supermarket or grocery store’s store brand products “frequently” when they do the main household shopping, a response that has exceeded 50% the past few years.

•“Awareness” of store brands remains high and is increasing. More than half in the study say they are now “more aware” of store brands than they were a year ago.

•Also on the rise is the percentage of consumers who say they are “buying more” store brands.  One-third report they are buying more now compared to a year ago. The “buying more” response has steadily increased: It was 22% in a 2006 Ipsos Mori survey and 30% in GfK surveys in 2008 and 2009.

• Eight out of ten believe private label is either “equal to” or “better than” national brands. The percentage of consumers who judge private label to be “equal to or better than” national brands rose to eighty percent, up from 77% in 2009.

• Half of consumers believe the supermarket or grocery store’s private label products they now buy have been “improving.” The percentage who say store brands have improved either “greatly” or “somewhat” as compared to a few years ago is up to 49%; up ten points since 2009.

In a separate 2011 study by Mintel, American shoppers said that store brands quality has improved. Some 44% of grocery shoppers believe store brand products are of better quality today than they were five years ago and 39% would recommend a store brand product. One third said they don’t feel like they’re giving anything up (such as flavor or prestige) by using store brands. Only 19% believe it’s “worth paying more for name brand products.”

Added Mintel: “The lack of perceived difference can be attributed, in part, to the fact that many retailers have introduced premium private label products that rival their branded counterparts in flavor and nutritional value, as well as the packaging design and shelf placement.”

As store brands move into another decade of growth, powerful drivers of store brands expansion will continue to be a good experience with a store brand product, which is often carried over to store brands in other categories in the store; and positive word of mouth from fellow shoppers and the media with respect to quality, performance and value.


 

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