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Archive for the ‘Private Label’ Category

Private Label & Food

Thursday, May 17th, 2012

The “surging” statistics on the growth of private label are distorted by the inclusion of non-food items like apparel, where most retailers have their own “house” brands.

Now a new study has shown that Private-label brands’ share of  the total U.S. dollar reached 17.4% in 2009, up from 15.2% in 2006.[1]

While hardly a surge, the growth is unmistakable. Store food brands account for $90bn in the U.S. or 30% of the total servings of food sold, and up sharply from the 20% share from 1984-2003. Part of the rise is due to the growth of supercenters, which now account for 27% of the grocery segment (up from 22% in 2005).[2] The market share is about half that of Europe, where store brands dominate.


[1] Source: Nielsen’s Global Private Label Report: The Rise of the Value-Conscious Shopper.

[2] Source: Food Marketing Institute (FMI).

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Private Label v. National Brands (Again)

Monday, February 20th, 2012

This blog post at Marketing Daily‘s website has some interesting statistics about the continuing wrestling match between store brands and national brands (Marketing Daily frequently quotes Broad Street Licensing Group in its stories about the food & restaurant business).

The post references this article in The Wall Street Journal about the rise of private label products, and their ascendency over national brands. Some of that is just the WSJ waking up to what those of us in the business have known for years. It fails to understand that the see-saw, back & forth dance of death between brands and PL isn’t a destination but a process. At the height of the recession, national brands found they had to fight back against consumers switching to cheaper store brands. That fight has cost them margin and profits, but they’ve regained share or exceeded it in some cases. PL products will likely ebb & flow as the economy shifts.

While PL products cost, on average, about 30% less than national brands, their prices have been rising at three times the rate of the big brands (5.3% v. 1.9%) with perishables up 12% (vs. 8% for national brands). The article gets all squishy about some PL products being positioned at premium prices. Wow, that’s only been going on for years, especially in Europe where retailers like Tesco have “good,” “better” and “premium” lines.

The competition from store brands is good for national brands, both the innovation some products bring and the product offerings that aren’t cost-effective for large package goods houses. With CPG houses like Kraft needing $100MM annually in sales to make a line worth their time means that store brands can fill a niche the bigs won’t bother with. However, articles that tout this or that innovative product like Safeway’s resealable bags for their Snack Artist line of chips make it seem like this is an across-the-board development, when in fact most store brands are still just copy-cat products at (somewhat) cheaper price points (but higher profit margins for the retailer). And with several large CPG houses producing store brand products quietly, the products in many cases aren’t even copy-cat: they’re the same.

It’s a business practice we find insane, but we don’t run the CPG houses.

Finally, the myth that PL products are “just as good as” or even “better than” brands is just that: a myth. I recently tried the Shop Rite nonfat yogurt, and it was significantly inferior, both in terms of taste, mouthfeel and fruit to the Axelrod product I have been purchasing for years. The price difference? About a nickel per container. I’m worth a nickel for better yogurt.

Posted in Consumer Package Goods (CPG), Grocery Stores, Private Label, Retailing | 2 Comments »

Private Label: the Canadian Experience

Wednesday, January 11th, 2012

Like in the US, private label products have done well north of the border. A new study by a disinterested third party asked consumers who buys them regularly who only occasionally.[1] The results show that sales are flat at $11.4bn while national brand dollar sales are up 3% to $50.9bn. Overall, Canadians spent $844 on private label products annually (+2% from a year ago). Private label products are 30% less-expensive than national brands, but the gap has narrowed thanks to price increases by PL retailers. Overall, Canadians spend $12.20 per trip on private label products with households making 69 trips per year to purchase private label products. As in other markets, retailers are becoming more concentrated, resulting in increased private label deployment. Other insights from the study include:

  • Heavy private label buyers are typically from larger households with kids under 18, or under 45 with higher incomes (over $70,000);
  • Super-heavy and heavy private label buyers make up 60% of total private label dollar sales;
  • The heaviest private label buyers spend more than the average shopper across all product categories and spend more per shopping trip; private label products may account for over 33% of their total shopping bill;
  • The “private label buyer” has shifted to a one-person household, aged 55- 64 with an income of $100,000 or more.

[1] Source: The Nielsen Company.

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The CPG Disconnect Over Private Label…

Tuesday, November 8th, 2011

The Soviet Union’s founder, Lenin, reportedly said–

“The Capitalists will sell us the rope with which we will hang them.”

Evidently CPG houses haven’t read much Lenin, since they continue to soak up excess manufacturing capacity by making private label products for stores. Is it any wonder then that most consumers think PL products are made by national brands? A new survey[1] finds less than 20% of executives believe consumers think store brands come from national brand manufacturers, while 80% of consumers think they do. Worse, 85% of those consumers think the store brands are “just as good,” and have no plans to switch back.

… And How the Stores Are Exploiting it: Kroger Rattles Swords

To that point: Kroger CEO Rodney McMullen in an investor call in September of last year promised to pass on price increases from national brands, thereby making Kroger store brands more competitive (“CPG brands rose prices more than they should have”).

In the past, stores had “eaten” some of the price increases in order to hold onto market share, but the strength of store brands and the willingness of consumers to switch away from national brands has emboldened some chains. Analysts predict that raw food costs will rise significantly over the next few months, but CPG houses may face a consumer backlash if they pass along cost increases to thrifty consumers. The chain is also looking at acquiring its own plants to produce private label products, though the prices for those companies they’ve approached have deterred any acquisitions. With A&P in trouble, its Food Emporium banner may be up for grabs.

[1] Source: Deloitte’s “The Battle for Brands in a World of Private Labels.”

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Private Label: Growth But No Dominance

Wednesday, September 14th, 2011

While many, including Broad Street Licensing Group, have concluded the Private Label wave in food has crested, it continues to push ahead, largely on the aggregate strength accumulated over the past five years.

A new study[1] estimates private-label food & beverage sales topped $87bn in 2009, and account for 17% of total food & beverage retail sales in the US. But interestingly, the share of PL sales is going increasingly to the specialty grocer such as Trader Joe’s and Whole Foods whose compound annual growth rate (CAGR) was 14% over the past five years, while traditional grocery stores grew only 4%. Supercenter stores (Walmart and Target) had a CAGR of 9%, while Club stores ( BJ’s Wholesale, Costco, and Sam’s Club) were little better than the mean CAGR of 6%. Discount supermarkets (SuperValu, Aldi, and dollar store Dollar General) were supposed to be the heroes of the Recession, but their food & beverage sales declined last year, cutting their five year CAGR to 2%.

[1] Source: Packaged Facts.

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Private Label’s Lack of Transparency

Wednesday, August 24th, 2011

Consumers usually assume the retailer is the one behind the production of its Private Label products.

But those in the food business know retailers aren’t doing more in most cases than selling products co-packed by companies that remain unknown to the consumer. Are the products made by the national brand using extra plant capacity, or a co-packer whose formulations, safety record, and packaging are otherwise obscure?

Now an online investigative website[1] is looking into who provides the wildly-popular Trader Joe’s PL products. Some results of the investigation indicate that Annie’s makes the Green Goddess Dressing; Trader Joe’s organic yogurt comes from Straus Creamery; and the retailer’s Spinach & Cheese Frozen Pizza is co-packed by Amy’s Kitchen (Trader Joe’s refused to confirm these findings).

While the cost savings are often considerable— Trader Joe’s organic yogurt is 80 cents below the same Straus Organic Yogurt— the downside is that consumers may not be purchasing what they think they are. For example, Dean Foods’ Horizon Organic Milk has been accused of using non-organic milk sources and selling the results as organic. Dean is the co-packer of the Shop Rite PL organic milk, though there is no labeling informing consumers about the source of the milk.

[1] The Faster Times as part of their ongoing “Generic Foods Investigation” by writer Amy Westervelt.

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No Private Label Cereal or Crackers, Please!

Tuesday, April 19th, 2011

According to a new study, private label cereal isn’t getting too many consumers excited.

Market Force Information found that 29% of 6,100 people surveyed in the US and Canada never buy private label cereal.

The primary inhibitor was taste. Of those who do buy store brand cereals, 71% cited price, value and promotions as the reasons.

Snacks including chips and crackers also fared poorly in consumer attitudes. Nearly 20% said they “never” purchase them, again citing taste or a preference for a branded snack, along with concerns about quality or even brand loyalty. Interestingly, only 4% of those surveyed said they never purchase private label milk.

Money, however, was not the reason for this behavior, as over 70% of respondees claimed a household income above $50,000.

Posted in Consumer Package Goods (CPG), Consumer Trends and Habits, Private Label | No Comments »

Brands Fight Back Against Private Label– But at a Cost

Thursday, January 13th, 2011

Despite the hoopla over Private Label, national brands are making a comeback, but it’s taking pricing strategies, heavy ad spending and innovative new products to lure shoppers.

Both Proctor & Gamble[1] and Colgate-Palmolive Co. reported increased sales in the last half of 2009, but they needed to cut prices and increase promotions to bring about a trade-up from store brands.

One strategy is larger packages that trumpet unchanged prices. In the fiscal second quarter ending Dec. 31, 2009, sales rose 6% from a year earlier to $21bn, with unit sales rising, reversing four straight quarters of decline. The price for this growth was a thinning of margins; profits fell 7% to $4.7bn. P&G had previously resisted lowering prices, but lowered market share overcame its arrogance and concerns about higher commodity costs. Some brands like Era and Cheer detergents are being repositioned as bargain brands, while Duracell is pushing bigger packs and Pampers diapers are touting greater absorbency with no price increases. Colgate has ridden the wave of anti-PL sentiment among consumers in the HBA sector, seeing sales up 11% to $4.08bn. Profits were up, too, to $631MM.

[1] P&G sells the most premium-priced household products, and are sometimes twice the price of the category average.

Want to learn more about leveraging restaurant brands to retail? Purchase the webinar we did with QSR Magazine called “Taking Your Brand to Retail Shelves” available for $249 by clicking here.

Please note: the webinar is only available for restaurants and restaurant executives and may not be sold to licensing agents or any companies currently licensing their brand to retail.

Posted in Consumer Package Goods (CPG), Private Label, Retailing | No Comments »

Private Label’s Strengths & Weaknesses

Thursday, January 6th, 2011

Some of you are probably getting sick of hearing about Private Label— frankly, we are, too. But it remains a very controversial and significant issue for both manufacturers and retailers.

With licensing royalties adding to the costs of products, the extent to which PL continues its rise or persists after the waning of the current recession will have a direct impact on food licensing. A recent poll[1] shows that PL products remain important to consumers looking for value, but that brands are still enormously valuable in the retail mix. Over one-third (37%) of those who switched to private label during the downturn insist they will continue purchasing them even after the economy recovers. Two-thirds “completely agree” or “agree” that “private labels are usually extremely good value for the money.” Fifty-nine per cent say “private labels are just as good as brand name products.” Yet 36% remain loyal to national brands, and when asked about 135 new products, brands beat PL. Those new products scoring highly enough to win the Better Homes & Gardens logo and “2010 Best New Product” designation included Yoplait Smoothie, Johnson’s Baby Bubble Bath & Wash and Olay Professional Pro-X Intensive Wrinkle Protocol.

[1] Source: BrandSpark’s 2010 Best New Products Awards American Grocery Shopper Study conducted between Oct. 12-Dec. 8, 2009 from more than 50,000 grocery shoppers.

Want to learn more about leveraging restaurant brands to retail? Purchase the webinar we did with QSR Magazine called “Taking Your Brand to Retail Shelves” available for $249 by clicking here.

Please note: the webinar is only available for restaurants and restaurant executives and may not be sold to licensing agents or any companies currently licensing their brand to retail.

Posted in Consumer Trends and Habits, Private Label, Retailing | No Comments »