Once seen as knock-offs of "name brands," private label products have become increasingly more accepted by consumers as quality has increased and retailers have expanded their offerings of private label goods. In fact, 78 percent of both lower- and higher-income consumers believe private label products are typically of excellent quality, according to a new study, "Private Label 2009: Understanding and Mitigating Private Label Threat," from Information Resources, Inc. (IRI). The latest research provides a thorough review of private label performance and best practices across channels, categories and retailers as well as current viewpoints from more than 1,500 consumers.
"Although nearly 80 percent of shoppers have positive attitudes toward private label, dollar and unit share are still below 25 percent," says IRI Innovation & Consulting President Thom Blischok. "Retailers still have enormous opportunities, and our research uncovers exactly where they should play and increase the likelihood of their success. We also analyzed the private label competitive landscape for branded manufacturers and how they should respond at the category, market and retail banner level."
Private Label Trends
During the first half of 2009, private label unit share increased in five of six departments, led by fresh/perishables and followed by healthcare and frozen foods. Private label dollar share has increased in 13 of 15 sales categories, with natural cheese, butter and canned vegetables leading the way and refrigerated fresh eggs, milk and frozen seafood trailing in the categories.
Private label's strongest growth performance tends to be within commodity-driven categories without a dominant national brand and with relatively low innovation. Retailers are in command in categories, such as butter, natural cheese, processed cheese and facial tissue and are developing in categories, such as peanut butter, pet supplies and cookies. Private label growth is slowing in coffee creamer, frozen seafood and refrigerated meat. And, national brands clearly have command in vitamins, frozen breakfast foods and shelf-stable dinners.
Region and Banner Findings
Looking across all U.S. regions, grocery channel private label shares are highest in the West (excluding California) and lowest in the Northeast. At the individual market level, shares range from highest in Wichita (35.4 percent) and lowest in New York City (14.5 percent); the average share for the total United States is 22.4 percent.
On the banner level, Kroger's Dillon division has the highest private label share at 35.5 percent, and A&P Food Emporium has the lowest at 10.1 percent. This considerable spread illustrates the major differences in store brand emphasis and development across the United States. Most grocery store retailers have successfully grown their private label share since 2007, such as Wegmans, which has enjoyed an increase of 3.8 share points.
"Four out of five shoppers are now 'sold' on private label quality indicating that product marketing during the current recession is successfully expanding the positive reputation and reach of these products," says IRI Consulting & Innovation Senior Vice President Sean Seitzinger. "However, branded manufacturers still have key advantages in the strong emotional connections between their brands and their loyal customers. For instance, personal care products have successfully differentiated themselves in the minds of shoppers."
Nearly two-thirds of shoppers often buy private label products instead of name brands. More importantly for retailers, all age groups and income levels show a relatively strong propensity to purchase private label.
Shoppers across all income levels and age groups agree that variety is an important factor when buying private label, with 65 percent of shoppers preferring stores that offer a high level of private label variety, which is up five points since late 2007. This research indicates that retailers need to think about variety in terms of products and packaging within a category, and manufacturers should be thinking about how they expand the expectations that consumers have for choice within a category.
Contrary to want many may believe, IRI research reveals that price is a less important purchase criteria to shoppers than variety, packaging and quality. While shoppers with lower-incomes (52.8 percent) are more likely to switch away from their typical brand for a better price, middle-income (52.2 percent) and higher-income (46.8 percent) are also more apt to switch versus a year ago.
"For retailers to maximize their private label strategies, it's not as much about the products anymore," adds Seitzinger. "It's about developing marketing programs that will drive purchase behavior, including trial, repeat and long-term loyalty. A successful marketing approach will center on taking these positive consumer attitudes and converting them into new shopper behavior across categories."
IRI Private Label Webinar
IRI is offering a free webinar, entitled "Achieving Success in Private Label: Emerging Trends through Q2 2009," on Aug. 26 at 1 p.m. CT. To register for the webinar, hosted by consumer trends and private label expert Sean Seitzinger, please visit: http://us.infores.com/NewsEvents/EventsWebinars/AchievingSuccessinPrivateLabelWebinar/tabid/245/Default.aspx.
About the Report
"Private Label 2009: Understanding and Mitigating Private Label Threat" is a culmination of research that includes an exclusive IRI AttitudeLink survey of shoppers, proprietary IRI InfoScan(R) and Consumer Network(R) data. For detailed information about the research's availability and pricing, contact Sean Seitzinger at [email protected]
About Information Resources, Inc.
Information Resources, Inc. (IRI) is the world's leading global provider of consumer, shopper, and retail market intelligence and insights, empowering consumer packaged goods (CPG), retail, and healthcare companies to grow their business profitably in a complex marketplace. Driving breakthrough growth in the industries it serves, the company's portfolio of services, solutions, and technology enable leading retailers and their suppliers around the globe to see what they are missing, act faster with greater confidence, and win at the shelf. Ninety-five percent of the FORTUNE Global 500 in CPG and retail leverage IRI to power their business. For more information, visit: www.infores.com.