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Natural Foods Merchandiser

Private label growth slowing

Private label sales grew at a slower pace in February after enjoying several months of healthy gains.

A report from Credit Suisse analyst Robert Moskow showed that store brands rose 3.2 percent in the four weeks ending Feb. 20, according to a story in the Wall Street Journal. Figures excluded sales at Wal-Mart.

The growth figures are down from a 4 percent rise in January and a 6 percent increase in July. In contrast, brand name food sales were up 2.4 percent in the four weeks ending Feb. 20. They dropped 0.2 percent for the four weeks ending Jan. 23.

The Journal attributed some of the gain to shoppers stocking up during recent winter storms as well as a push by brand-name companies to offer coupons and other discounts to draw shoppers.

But Jim Hertel, a managing partner at Barrington, Ill-based Willard Bishop, cast some doubt on the report.

“I’m not sure I buy the trend cited by (the Journal) overall. I believe that private-label brand growth may be slowing, but (it is) still growing at a faster rate than name brands, and the name brands that are growing now typically have done it via deep discounting,” Hertel said.

“I would agree that in many categories and at many retailers, as price gaps shrink, fewer shoppers may feel the need to switch to private-label brands,” he said.
Hertel also said he thinks the story in the natural and organic industry might be a little different.

For example, Whole Foods 365 brand “is nearly as much a name brand as a private brand, and may be the first and only experience many historically conventional shoppers have had in the natural/organic world.

With name brand sales gaining a bit on private label, “Whole Foods may be at a reduced need to keep up the pretty substantial ‘value’ kick they have been on with 365.”

Sheldon Baker, senior partner with San Francisco-based marketing consultant Baker Dillon Group, also pointed to the blurring of lines between some private labels and brand names. “Thus, consumers who are cutting spending will continue to gravitate more toward the private label lines. This area will thrive because consumers now equate private label brands with national brands.”

Unit market share of private label foods increased from 20 percent to 21.8 percent in the 2001-2003 recession, according to the Private Label Manufacturers Association based in New York.

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