Is Private Label Vulnerable?

Surprising trend toward national brands in HBC, refrigerated entrees and more

Various private labels are getting a run for their money in competition against national brands, as the latter revs up its merchandising engines to communicate value to consumers for some product categoriess at which private labels typically excel. Ironically, the trend toward brand names and away from some private labels is occurring after a 2013 payroll tax went into effect in January—a burden directly hitting consumers’ paychecks.

The back story on the shift to brands, according to a report, “Reversal of Fortune: National Brands Pick Up Gains on Private Label,” from Symphony Consulting, a business unit of SymphonyIRI Group, witnesses the fact that consumers see the average discount perceived for private label as declining. The market researcher and consultancy said private-label dollar sales increased 2% in the first four weeks of 2013, versus 1% during similar-period 2012. However, that growth belies a trend that sees national brands “elevating their value proposition,” on products such as refrigerated meats, weight loss, vitamins and coffee.

Private-label unit share of CPG slipped to 17.1% (November 2011 to same period 2012 as reported by the researcher last November). The dollar sales of these varieties inched forward in that period, but national brands gained share in 40 of the 100 largest categories. Private-label sales in c-stores also slipped slightly in the one-year period ending in November, when SymphonyIRI conducted a Webinar on private-label trends. C-stores reported that private-label sales were 1.6% of overall sales (a flat performance) while unit sales were 2.3% of sales, slipping 0.1% from the year before.

Known to be a very concentrated segment, private label’s heaviest buyers dedicate only one out of four CPG dollars spent to private-label solutions, SymphonyIRI noted. It did not help that from a merchandising-support perspective, private labels received below-average levels of support.

From a product-specific view, the segment offered the most compelling savings—and results—with health and beauty products. Analgesics and cold/allergy and sinus medications also find consumers reaching more for private label. In totality, products identified as “health care” are propping up the entire private-label category at +0.6 and +0.7 from dollar and unit sales growth, respectively.

Vitamins, fresh eggs, weight control and refrigerated entrees are four categories that the segment yielded position to national brands. SymphonyIRI suggested that retailers refine private-label development and measure and monitor these products better. “Benchmark private-label share versus national brands, and continually track shifts at market or store levels,” advised SymphonyIRI.

The refrigerated-meats segment was an example of the shift occurring with brand marketers. Consumers that might once flocked to private-label refrigerated meats for the perceived value had a reason to reconsider brands like Hormel, Tyson and Purdue, as branders got serious about providing offers not to be refused.

SymphonyIRI said that merchandising support for refrigerated meat declined, mainly for  display- and feature-related strategies; however, price-only actions for refrigerated meats prevailed, and brands more than likely capitalized on this aspect.  

Susan Viamari, editor of SymphonyIRI's Times and Trends newsletter, said brand marketers had an objective to raise the profile of their brands to ward off private-label encroachment, and they succeeded in this regard.

In the coffee segment, private-label stock was affected by innovations in K-cups for the single-serve Keurig brewing systems, and brands such as Folgers and Maxwell House joined retail brand such as Starbucks, Dunkin’ Donuts and Caribou Coffee with boxed packages to entice consumers.

But, private-label share rose in shelf-stable seafood (such as canned tuna), which was sparked by the fact that the “buy rate” of this product has been on the rise, said Viamari, and private-label momentum in shelf-stable seafood rode the wave of this trend.

For a PDF of this report, click here.