Store Brands Growing Across All Channels

Store brands enjoyed another record year of sales last year. Among all major U.S. retail channels, sales increased by +2.9% pushing annual revenue up more than $3 billion to over $108 billion, an all-time record.
Among the country's supermarkets, store brands experienced a record year for annual sales in 2012. Sales totaled $59 billion and with a private label unit share of 23.1% and dollar share of 19.1%. Since 2009, sales in the supermarket channel have increased at an annual rate of +2.6%, compared to an average gain of +0.9% annually for national brands.
Store brands are enjoying robust growth in the country's drug chains, too, gaining +5.5% in sales for a total of $8 billion in 2012, also a new high. Store brand dollar share rose sharply to 15.9% while unit share improved to 16.6%, both record levels. In the drug channel, sales of store brands have grown at an annual rate +6.9% since 2009 while annual gains for national brands have averaged only +1.6%.
These figures, as tracked by The Nielsen Company, are compiled from supermarkets, drug chains and mass merchandisers, including Wal-Mart, as well as dollar stores, the warehouse club channel and military exchanges. Looking beyond these traditional outlets, a comprehensive figure for annual private label sales in food and non-food consumables would include an estimated $10 to $15 billion in additional revenue from chains ranging from the no-frills retailer Aldi and Costco Wholesale, to specialty chains like Whole Foods and Trader Joe's, as well as convenience stores. That would likely produce a grand total in store brand sales of more than $120 billion. Moreover, that figure does not even take into consideration store brand products sold by chains specializing in office products; hardware, do-it-yourself, home improvement and domestic goods; consumer electronics, baby care, pet care, toys, personal care and sporting goods.

Studies underscore the popularity of store brands

New industry studies reinforce the 2012 sales data by documenting the growing popularity of store brands among the country's consumers.

• Growth is the result of rising product quality according to a Consumer Edge survey of 5,000 shoppers: "While US consumers were slightly less likely to economize in 2012 when buying packaged goods than they were in 2011, use of store brands continues to rise in many categories. This is driven by store brand quality continuing to improve across most of the categories covered in our research and store brands are likely to continue to gain share in many product categories." One key conclusion was that nearly everyone buys store brands at least some of the time across the fifty-seven product categories in the study.

• At the same time, brand loyalty continues to erode. Market researchers have found most consumers are "brand agnostic." They are open-minded when it comes to brands, as desires for new experiences often replace brand loyalty. More than half have become "brand agnostic," saying they don't care if a product is offered under a national brand, store brand or specialty brand. Two thirds said they choose products according to a whim or desire for variety rather than brand affinity. Consumers neither avoid nor seek out particular brands, as long as the product fulfills their desire for something other than the usual fare.

• In such a brand-neutral environment, shoppers are increasingly reaching for private label. In a GfK study of 1,000 men and 1,000 women who identified themselves as the primary grocery shoppers for their household, more than 40% of both men and women declared they were "frequent" purchasers of store brands. The patronage figure rose sharply to over 80% among both men and women when those who are "frequent" and "occasional" purchasers of store brands were aggregated, according to the nationwide study that was conducted by GfK for PLMA.

When consumers try store brands they like them

The recent economy no doubt forced consumers to test new purchasing habits. Good results with store brands during such 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, a large percentage stays with their new private label choices. Sales data and consumer behavior from previous U.S. recessions bear this out.
Says one industry expert: "The recession drove more households to try private label and in categories where satisfaction is high consumers are saying 'I like the performance and don't need to rush back to the branded offering.' But the economy is not the only driver of store brands' success. Retailers' investment in quality, merchandising and space are also contributing to growth. Sales will continue to rise. Consumers are recognizing a good deal when they see one and they are happy with the quality of today's store brands." Furthermore, innovative, value-added store brands are finding widespread consumer acceptance despite the premium price. The Wall Street Journal affirms that price is a rapidly diminishing consideration for consumers who opt for store brands. "Consumers are developing loyalty to store brands for reasons besides price, and that could be a problem for food and consumer-products companies as the economy rebounds. In some cases, consumers even pay more for store brands, many of which have been positioned as gourmet or specialty items."

Store brands are 'mainstream'

Nielsen says, "Once the exclusive purview of value-conscious shoppers, store brands have achieved mainstream status among most consumers by narrowing the price and quality gaps that once demarcated national brands and private label. Retailers are responding by venturing into new territory such as health and beauty and even alcoholic beverages. By applying a new rigor to store brand management, retailers will borrow a page from the national brand playbook and grow their offerings guided by consumer research, innovation, tiered pricing and proactive brand teams. That will help store brands achieve staying power and build loyalty."
As store brands move into another phase of growth, powerful drivers of that expansion will continue to be a good consumer experience with a store brand product, which is often carried over to patronage of store brands in other categories; and positive word of mouth from fellow shoppers and the media with respect to quality, innovation, performance and value.


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