NOVEMBER 2005 Times & Trends Executive Summary
PRIVATE LABEL: THE BATTLE FOR VALUE-ORIENTED SHOPPERS INTENSIFIES
 

IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This issue provides an in-depth analysis of private label sales trends across channels, categories and consumer segments.


 This free summary is also accessible via the GMA Web site  at http://www.gmabrands.com/publications/gmairi.cfm

Introduction

Competition for private label shopper spending is heating up. As value channel growth begins to plateau, supercenters, mass merchandisers and club stores are increasingly staking a claim on private label shoppers. While grocery channel private label share is essentially flat, share across value channels is growing.

As detailed throughout this report, private label development, performance and potential vary dramatically by category. And, beyond food and beverage staples such as eggs and milk, the propensity to purchase private label varies substantially across consumer segments.

Both brand manufacturers and retailers will need to reevaluate their strategies vis-à-vis private label within this environment. The “right” assortment and competitive tactics for both manufacturers and retailers will depend upon the mix of heavy versus light private label shoppers within a store and within their category/brand consumer base. Effective marketing plans will be category and store-specific.
Key Findings

  • Private label share is growing among value channels.
    While all-outlet private label share increased only three-tenths of a percent over the past two years, more sizable gains occurred across club stores, mass merchandisers and supercenters. Among traditional retailers, drug store private label has fared better than grocery with both volume and dollar share gains, while grocery private label volume share declined slightly. Cross-channel private label competition is likely to continue to intensify.

    

  • Average private label price points remain significantly below branded products. On average, CPG private label products are priced at a 27 percent discount to branded products (across food, drug, mass channels excluding Wal-Mart.) Higher discounts are evident among non-food products versus food and beverage. In 12 percent of CPG categories, private label commands a premium – evidence that private label brands are no longer a pure low-price play.

  • Private label penetration among category buyers is relatively low outside of food and beverage staples. More than three-quarters of category buyers purchase some private label among staples such as eggs, milk and bread. Among 80 percent of CPG categories, however, less than 50 percent of buyers have purchased any private label within the category. Within most categories, heavy private label shoppers are the primary private label target consumer.

  • One-third of private label shoppers comprise 60 percent of sales. “Heavy” private label shoppers allocate 20 percent of their CPG budget to private label versus nine percent among light buyers. Household size is the strongest determinant of heavy private label shoppers – propensity increases steadily by number of consumers in the household.

  • Retailers have secured private label share gains through increased trial and loyalty in select categories. Among 53 percent of the top 100 CPG categories, private label volume share has increased. Within well-developed private label categories, stepped up merchandising played a role in inducing trial, and loyalty increased as consumers were apparently satisfied with quality.

  • Innovation drove share gains for manufacturer brands within several private label strongholds. Manufacturer brands increased share within 47 percent of the top 100 CPG categories, including many in which private label has held an above-average share such as natural cheese and ice cream/sherbet. Across several of these categories, successful new branded product introductions resulted in private label share declines.
     

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Source: IRI's Times & Trends Reports
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