Private label set to grow, but quality remains key
are unique with improved marketing and packaging, according to a
new report, which claims the US market is ready to see more private
label.
And consumers want private label to come hand in hand with premium quality, says the report by consumer researchers Hartman Group
Published today, Private Label from a Consumer Perspective, reveals that the perception by some that own-label goods are of an inferior quality to branded products remains the main barrier for those consumers who do not opt for private label.
But the majority of shoppers - 82 percent- consider store brands to be identical in quality, or close to the quality of national brands,
"Today, private labels have shed the dark cloak of their generic 'low price, low quality' past and are giving name brands a run for their premium money," said the Hartman Group.
"Importantly, private labels are not just for supermarkets; consumers face a growing array of private label choices in just about every retail channel they shop as a multitude of chains and segments exploit key private label categories as tools of differentiation," it added.
Indeed, one area identified by the group as "largely unexplored territory" is a dedicated store environment that sells only its own brand products, such as Trader Joe's. It also points out the potential of making a store brand an international name brand in its own right, such as Canadian supermarket chain Loblaw's President's Choice line, which has been licensed to non-competing retailers around the world.
According to the report, private label holds certain advantages over name brand products, which could lead to retailers expanding their own label product offerings.
"Perhaps because (…) name brands introduce a staggering number of new products and line extensions each year, shelf space real estate is limited with steep leasing terms and conditions. Consider the prevailing (albeit somewhat changing) practice of slotting fee requirements and fees for prime real estate locations for in-store displays, combined with additional costs for advertising and in-store promotions and marketing, name brands becomes a very expensive proposition," it said.
The report examines opportunities for private label manufacturers to create 'relevant' store brands, as well as identifying consumer associations between which types of stores or retail channels provide the highest and lowest quality private label products.
"The question is whether private label brands have come far enough in the minds of consumers for these brands to compete as legitimate brands in their own right," said Laurie Demeritt, the Hartman Group president.
"While it appears they have closed the gap with name brands, quality is a factor that cannot be stressed enough. And, it's not just about quality ingredients - it's about creating quality experiences," he added.
The report is based on a survey conducted in March 2006, which polled over 1,048 consumers.
The Hartman Group, which bases most of its reports on ethnographic research, has so far this year conducted around 650 hours of consumer observation, which were designed to help understand the "why behind the buy".
Its research involves tracking consumer behavior in all settings where food is bought and consumed. As well as conducting interviews with around 300 US households, the researchers have spent time with consumers in their homes, in supermarkets and in restaurants.
