Quality is key to sustaining private label growth

24-Nov-2008 - Last updated on 24-Nov-2008 at 15:44 GMT

Related tags Private label Brand Marketing

The economic downturn in the US is leading to strong sales increases for store brand products, but high quality standards need to be maintained to make sure they are long-lasting, experts warn.

An analysis of the past three US recessions indicates that store brands make sales gains during times of economic weakness, but only hold onto increases when high quality standards are maintained, according to Brian Sharoff, president of the Private Label Manufacturers Association (PLMA).

Private label products account for more than $81bn in the US, up 10.2 percent over the past year, with health and wellness claims including no trans fats, no saturated fats, multi-grains and antioxidants among the categories seeing strong growth.

In the 2001-2003 recession, private label’s unit market share climbed from 20 percent to 21.8 percent, according to the PLMA. And in the 1990-1991 recession, unit share for retailer brands moved up from 17.6 percent to 20 percent.

Sharoff said: “In both of those economic downturns, consumers tried store brands, liked them and stayed with them after the economy improved.”

However, the results were quite different in the 1980-1982 recession. Private label market share climbed rapidly during that period, as retailers introduced many budget-priced “generic” product lines with basic black and white packaging and low-quality ingredients.

But these gains were short-lived, according to according to the PLMA, as shoppers were disappointed with quality and soon switched back to their favorite national brands.

Sharoff said: “Generics have virtually disappeared from stores and now quality, assortment and innovation are driving the success of private label.

“The state of the economy can create an historic expansion of retailers’ store brands, but only if the industry remains committed to offering consumers the best store brands possible.”

Positive perception

Private label products are viewed positively by the majority of US consumers, according to a new survey by The Nielsen Company, and an improved sense of quality is considered the likely driver.

It found that 63 percent of consumers believe private label brand quality is as good as name brands and 33 percent consider some store brands of higher quality than name brands.

Meanwhile 62 percent of consumers report they consider store brands to be as good as name brands, up three points since 2005.

Todd Hale, senior vice president, Consumer & Shopper Insights, Nielsen, said: “While private label products continue to follow the success of consumer packaged goods (CPG) manufacturers’ name brand introductions, more CPG retailers are making private label a priority with messages on quality as strong as messages on value.”