Private label potential boosted by US drink diversity drive

By Neil Merrett

- Last updated on GMT

Related tags: Private label, Analyst, Us

While branded beverages continue to dominate the US drinks industry, private label manufacturers are now catering for more health focused product segments such as juices and waters, according to a new report.

In a study of the potential thirst in the US for private label, or own-brand products, analyst the Beverage Marketing Corporation (BMC) says that the industry was managing to evolve along with consumer tastes for non-carbonated alternatives.

Despite the prevalent position held by industry leaders such as Coca-Cola, PepsiCo and Dr Pepper, carbonated soft drinks, as well as waters, milks and fruit-based beverages show major potential for private label groups, says the analyst.

The claims come on the back of other findings from research group Datamonitor, which suggest that the consequences of the economic downturn may play into the hands of private label brands that aim to bridge consumer demand for both added-value and cheaper products across the globe.

US shifts

BMC said that despite the market potential in the US, major branded beverage suppliers had generally succeeded in preventing losing consumers to own-label manufacturers through marketing and pricing initiatives across the country.

For all the resilience of these leading brands, the report added that sales of private label beverages had remained consistent over the last decade and a half.

Since 1993, private label has ranged from a 4.8 per cent [market] share on the low side to 7.4 per cent on the high side,”​ stated BMC. “In 1997, private label accounted for 5.0 per cent of carbonated soft drink volume.”

By last year, private label goods held 6.6 per cent of the market, according to the findings.

Own-brand segments

Private label fruit-based beverages remain a particularly well-established segment, a factor which the BMC claims may make consumers less brand loyal than with other types of drink.

According to the analyst, last year, 14.4 per cent of supermarket-sold fruit beverages were private label products, a share that rose to 17.2 per cent in drug stores.

BMC says that on a similar level, milk drinks were even more established as private label products, with 62 per cent of all fluid milk sales belonging to the segment.

“Milk is the only category with more than half of its sales in private label,”​ stated the analyst. “The greatest amount of private label milk sales are in no, low–fat and whole milk.”

By contrast, BMC found only a small number of private label sales in the flavoured milk and milkshakes category.

The bottled water industry was another potential area of growth for private label manufacturers, where consumers were again seen as not so brand loyal despite a number of key players operating in both the US market and globally, the report said.

According to BMC, this potential relies heavily on the type of water sold though, with replacements for tap water like retail bulk packages representing the most successful area for private label groups.

According to the report, the private label beverage segment in the US is likely to remain dominated by non-alcoholic drinks for the near future.

“Beer, wine and distilled spirits have minimal private label sales and show little sign of having that change anytime soon,”​ stated the report. “While brands are king in most of the non-alcoholic categories, brands are even more in demand in the alcoholic categories.”

Global opportunities

Market analyst Datamonitor said earlier this year that US optimism in the market for private label products was reflected in a global consumer shifts towards higher profile, quality-focused own-brand goods.

"Firstly, they may look to maintain their preferred branded choices, but are not afraid to shop around to get the best deals," ​stated Datamonitor analysts Katherine Collins and Richard Parker. "At the next stage, private label has become a serious contender as consumers no longer see own-brand premium ranges as inferior."

Datamonitor cited Tesco's Finest or Sainsbury's Taste the Difference range in the UK as examples of private label brands that try and play up their luxury to court new additional consumer interest.

By contrast, the analysts claimed that growth in the market for premium products would remain exclusively within its core customer-base.

"The market may slow due to mainstream consumers freezing or reversing any propensity to trade up to branded premium products," ​they stated. "However, consumers may still trade up to private label premium items based on the price advantages they still offer."

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