Exclusivity Through Private Brands - Part 1

A few weeks ago, we blogged about how the new economy is driving increased trial and usage of private brands, with total store-brand sales in the supermarket channel reaching nearly $60 billion annually. Since then a few new studies have come out that shed some more light on the continued popularity of own brands.

First, Consumer Reports tested dozens of store brands against their national-brand counterparts in a blind taste test. They sampled across center-store categories to include foods such as peanut butter, cranberry juice, Greek yogurt and ranch dressing. They also took private-brand samples from a variety of chains including Wegmans, Meijer, Winn-Dixie and Target. In total, 19 private-label pairs were compared side by side.

The result? In 11 out of the 19 taste tests, store brands tied or beat their name-brand rivals. Pretty impressive given that store brands are typically less expensive and provide the retailer with a higher gross margin, a point of differentiation and a tool to build customer loyalty. After all, a store-brand product is one offering shoppers will not find on the competitor’s shelf.

Another private-brand study that caught our eye was developed by Rabobank’s Food and Agribusiness Research Group. The report forecasts that private brands are on track to achieve market penetration on par with Europe, with share growing from slightly less than 20% today to 25-30% during the next decade. Over the past 5 years, retailer brands grew 6 percent compared with just 2% for the national-brand packaged foods.

Interesting findings, but not the least bit surprising to us here at Buxton. Our own study and white paper found a great number loyal private-brand shoppers and a highly-desirable group of so-called “switchers” – shoppers who don’t have an outright preference for either national or private brands and provide an open playing field for retailers to expand private-brand sales.

Here are three reasons that we believe are driving the popularity of store brands:

The economy and shoppers desire to save money on grocery-type items. Along with the preparation of lists, clipping coupons and buying items on sale, private brands have emerged as one of the most popular money-saving measures in the recessionary environment. While some shoppers may return to purchasing national brand products once the economy and job market improve, we believe most consumers will continue to purchase store brands based on their positive experience. Also, unlike searching for coupons and studying up on sales promotions, purchasing of private brands does not require any additional time or effort. It’s an easy way to save.

Consumer perception of value…without compromising their quest for taste and quality. As we saw earlier, private brands are holding their own in direct comparisons against national brands. Additionally, many retailers are developing gourmet or upscale private brands, as well as own-brand offerings that are organic, natural or locally-sourced.

The private-brand offering itself. U.S. retailers have aggressively expanded the number of SKUs and have leveraged private brands as a way to differentiate themselves. Retailers are diversifying their offerings, no longer emulating national brands, but bringing bold, game-changing new private-label foods to various categories.

How is your private brand strategy evolving?

Journey Awareness Persona C-Suite/Finance Retail