Is Private Label the new Black?
January 1, 2014
by Carlo Jannotti
As a short-term solution to the private label shift, many national brands have been reducing prices to shore up volume given the rise of private label brand trial and purchase. This is reducing profit not only for the national brands, but it's also driving down profits on store brands as they need to react. A real lose-lose scenario.
Could it get worse?
Unfortunately, yes. More than 90% of the shoppers believe they will continue buying store brands after the recession ends. Apparently brand loyalty doesn't stretch very far in the grocery aisle - especially when quality is comparable, given the paltry 8% that intend to go back to their previous choices. In the end, the price-value relationship needs to be right.
More interesting findings:
- Nearly half of all consumers polled say they believe the supermarket where they normally shop should carry more store brands.
- Compared to one year ago, 3 in 10 customers say they are now buying more store brand products.
- Fifty-seven percent say they buy private label frequently, up from 55% earlier this year. More telling is the dramatic rise from the 41% in a 2006 survey.
What can you do?
If you're a national brand:
It's time to take a hard look at your promise, what you deliver and how you engage your audiences. Start with your package. Don't just twitter your time away on social marketing, engage the consumers in a meaningful way at point of sale. It may be time to upgrade your package design and leverage your brand's proprietary assets to enhance a perceived advantage. Consumers need additional reasons to believe that they are getting more for their money. Once a brand is exposed as being equal in quality to private label, how will it ever command a higher price point?
If you're a private label brand:
Take advantage of the opportunity to grab market share. Make quick use of best practices in messaging and package design systems to bring more offerings under your house brand. Use category cues to make certain you visually "belong" in the consideration set. If your product is at parity, packaging innovation in form factor and convenience may also help create a lift.
Recent consumer polling data of the household's primary grocery shopper found an astonishing 35% trying private label products in categories where they previously only bought a national brand. The bad news for the national brands is that 94% found the store brands compare favorably to their prior choices.