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Private, national brands can find mutual growth: IRI

By Maggie Hennessy , 03-Jan-2014
Last updated the 03-Jan-2014 at 16:45 GMT

Costco's private label Kirkland Signature cookies, photo from Costco
Costco's private label Kirkland Signature cookies, photo from Costco

Both private label and national brands’ shares of sales remained unchanged during the past year, with private label share of dollar sales inching up slightly, due in large part to above-average price inflation within the private label sector.

But a new report from IRI entitled, “Private Label and National Brands: Paving the Path for Growth Together” claims that consumers’ “new normal” of seeking value in every purchase decision paves new roads of opportunity for private label and national brand CPG marketers to work together.

“While some industry experts believe private label has ‘had its day,’ IRI believes that private label and national brand marketers can enjoy mutual growth by not simply co-existing, but rather evolving and working together to serve the full spectrum of consumers’ needs and wants,” Susan Viamari, editor of Times & Trends at IRI, said.

“Of course, consumers are shopping conservatively and looking for money-saving options, so they have embraced private label. However, national brands remain critical. In this environment, manufacturers and retailers must work together to provide a balanced assortment of national and private label solutions, targeted at the store level, to offer the best overarching value.”

Store brand growth across channels

Private label share is highest in the grocery channel, at 21.9% of unit sales and 18.2% of dollar sales. Supermarkets also post the strongest level of private label penetration by far, at 96.9%, according to IRI.

The club channel is demonstrating the strongest private label share growth, with increases across both heavy and light purchasers of private label products. This growth brought the channel nearly $1.4 billion more in private label sales from heavy and light buyers in 2013 compared with 2010.

In addition, private label performance in the drug channel was strong during the last year, due to such factors as retailer efforts to broaden and enhance private label programs. Unit share grew one point, to 17.6%, while dollar share climbed less sharply, to 16.9%. Though private label share inched up slightly in the convenience channel during the same time period, it remains well below industry average, at 2.4% and 1.7%, respectively.

Private label strong in bottled water and bread/rolls; national brands strongest in supplements

Private label volume share increased across five, of the 10 largest private label categories during the past three years, according to IRI (bottled water, fresh bread and rolls, food and trash bags, toilet tissue and cups and plates). These categories are viewed as “staple” categories, as consumers tend to see little differentiation between private label and national brand options in these categories. Combined, share victories brought more than $2.6 billion to private label marketers’ top lines during the past year alone.

National brands are also demonstrating strength in important private label categories. During the same period, national brand marketers gained ground in the remaining top five private label categories, increasing the revenue they generate in these categories by a combined total of more than $1.7 billion across IRI’s multi-outlet geography (vitamins, milk, fresh eggs, natural cheese and frozen seafood). The biggest win for national brands was in the vitamins category, where volume share climbed 6.9 points since 2010.

“Private label is clearly here to stay,” said Viamari. “For private label to prosper, it is critical for private label marketers to understand the role of their brands in relation to competing national brands. And, national and private brand marketers must step up their collaborative focus, directing their efforts to retailer/manufacturer partners that ‘best fit’ their strategic goals and objectives. This type of strategic collaborative marketing partnership will increase sales and strengthen customer loyalty by getting the right products to the right place at the right time, with a targeted value proposition.”

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