Look to Europe for future of US store brands, says Nielsen

The private label sector has thrived during the recession, but opinions have been divided on whether it will continue to do well as the economy recovers, as store brands have traditionally done well in times of economic hardship only to slump again when the economy has improved. Over the past couple of years, however, there has been a concerted effort from manufacturers to not only lower the cost of private label foods, but to target additional consumer expectations in terms of overall value.

Although value is still important, Nielsen has said that innovation in terms of new colors, flavors, packaging and marketing campaigns could differentiate brand-name products from store brands.

European innovation​

This is one area in which the market research organization says the European private label sector has done particularly well – with innovation facilitated by consolidation among retailers and early investment in store brands. In comparison, the US private label market is much more fragmented, Nielsen said.

“Examining what European retailers have done and are doing to drive growth can provide clues to what could be in store for the American market,” ​it said.

Nielsen quotes figures from market research organization Europanel, claiming that some European retailers are reporting over 40 percent of sales coming from store brands.

In comparison, the market researcher said that even “the most successful retailers”​ in the United States have only about 20 to 30 percent of sales coming from store brands, “highlighting a significant opportunity for growth.”​

But Nielsen also said that it is not all doom and gloom for name-brand products. Even though manufacturers of private label products are beginning to ramp up innovation efforts, the organization said in December that makers of name-brand goods could lure consumers back from store brands with innovative products and marketing, particularly in the health and wellness arena.