Executives may misjudge consumers’ views of store brands, says Deloitte

In a new report, The Battle for Brands in a World of Private Labels, ​the accounting and consultancy firm collected responses from 193 executives in the consumer packaged goods (CPG) industry and found a divide between executives’ perspective of consumers and the views of shoppers, which were gathered from a Deloitte survey carried out earlier this year.

While 80 percent of consumers said they believe “most store brands are manufactured by the traditional national brands”, ​fewer than two in ten executives said they thought consumers view store brands as likely to be made by national-brand companies. In addition, 85 percent of consumers surveyed said they have found several private label products to be just as good as national brand products and have “little reason to switch back”.​

The manufacture of store brand products may indeed be outsourced by retailers to manufacturers of national brands, although retailers may also manufacture their own goods, or rebrand private label goods.

Despite this disconnect between CPG executives and shoppers’ understanding, executives did not underestimate the popularity of store brands. When asked about the likely future market share for private label goods, 90 percent of retail executives and 77 percent of CPG executives said they expect it to increase or increase significantly.

In order for manufacturers of national brand products to stay competitive as consumers seek value and embrace store brands, Deloitte’s vice chairman and US consumer products practice leader Pat Conroy advised: “What they need to consider are variations on current brands and what new innovations should be brought to market so as not to overwhelm an already substantial marketplace…To compete in this new ‘store branded’ world, CPG companies must increase their direct-to-consumer efforts while simultaneously developing a product portfolio that reflects each retailer’s unique consumer base.”​

According to recent research from Symphony IRI Market Insight, the place of private label products in the grocery store has been cemented by the economic downturn as many categories have continued to grow. The organization says that store brands have grown both in terms of dollar and market share in 2010 – although at a much slower rate than during 2009.

Its figures show private label in terms of unit sales grew from 21.6 percent of the market in 2008, to 22.9 percent in 2009, to 23.1 percent in 2010. For dollar share, the growth was from 17.1 percent in 2008, to 18.1 percent in 2009, to 18.3 percent in 2010.