Private label grows with improved quality, variety, says report

By Lorraine Heller

- Last updated on GMT

Related tags Percent Private label Brand Coffee Us

Private label food and beverage products continue to grow in
popularity, opening up new opportunities for some manufacturers,
while presenting tougher competition for others.

According to a report released today by Packaged Facts, store-brand products have improved in quality and variety in recent years, and have consequently earned themselves a larger slice of consumer loyalty.

"Market growth comes as no surprise as retailers and manufacturers have replaced the low-quality 'generic' products with high-quality products and packaging that rival national brands,"​ writes Private Label Food and Beverages in the US

The report estimates that sales of own-brand products in the US passed the $48bn mark last year, almost 13 percent higher than sales in 2002, but a modest 1.3 percent up on the previous year. Sales are forecast to grow at just over 3 percent per year to top $56bn by 2011.

Although these growth rates remain modest, the new report reveals that opportunities exist within selected product groups. These include meals, appetizers, and side dishes-particularly of the frozen variety-as convenience continues to drive consumer choice. Pizza and ethnic foods are also forecast to grow at better than average rates.

The two largest food segments, dairy foods and grain-based foods, showed some of the slowest growth during the 2002-2006 period. Dairy grew at a compound annual growth rate of 2.4 percent to nearly $7.4bn in US retail sales, while grain-based foods grew at a more modest 1.3 percent to an estimated $5.5bn.

Overall, private label beverage sales declined in the year, pushed down by the juice segment. The largest beverage segment, dairy beverages, saw a modest 1 percent increase. Greater growth came from coffee and tea, which reported increased sales of almost 7 percent. The highest flyers in the beverage segment were sports and energy drinks (10 percent growth) and bottled water (13 percent growth).

According to recent reports, 41 percent of shoppers now identify themselves as frequent buyers of store brands, compared to 36 percent five years ago.

"The current wave of high-visibility private-label products - including organics and other premium fare - has effectively contributed to both the building of brand equity and relationship building with core customers,"​ said Packaged Facts.

Following in the same vein as the rest of the industry, private-label goods are driven by the trinity of convenience, health and flavor.

"Of the trinity, flavor is still the most important factor for development. Consumers today are much more adventurous and open to new taste and texture experiences. As such, the introduction of new and innovative products that combine good taste, health and convenience will be key in capturing and keeping those consumers who desire a flavorful, good-tasting product,"​ said the report.

According to data from Datamonitor's Productscan Online, approximately 398 newproducts with the package tag "Private Label" were introduced in 2006 in the US, up from291 in 2005, but still down from a high of 433 in 2003.

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