Private Label Spending: Unstoppable or Passed its Peak?
July 27, 2009 - Despite an increase in couponing and price promotion by national brands, the latest market basket research by the Private Label Manufacturers Association (PLMA) shows that shoppers continue to reap sizeable savings on products throughout the store when choosing the retailer's brand.
Conducted over a six-week period, the research on consumer savings tracked prices on 42 basic grocery and household items at a typical supermarket. The results indicate that consumers buying the store brand would save $40.91, on average, on the total market basket, representing savings of 30 percent when compared to weekly purchases of national brands in the same categories.
But it seems that the price difference versus national brands is not their only motivation.
A recent poll of consumers shows that the quality of store brand products is a big factor in convincing shoppers to keep buying them. In a survey by GfK Custom Research North America, 9 in 10 shoppers agreed that the store brand products they buy are as good as or better than national brand products, and the same percentage said they will keep buying store brand products after the recession ends.
In addition, a recent study by Information Resources featured in Adweek.com found that that private label popularity increased with age. Sixty-six percent of consumers aged 53 through 62 purchased store brands, and 83 percent gave the products "excellent" quality ratings. Top private-label products included bottled water, ice cream and nuts. This trend, however, was not reflected in non-food products, such as over-the-counter vitamin supplements and medications, products that older consumers had more of a reliance on than their younger peers.
Still, not everyone agrees that private label sales are on the up and up. In a FoodNavigator.com article, Eric Sher, research associate for European food at investment firm Bernstein, expressed his belief that private label peaked last summer.
His analysis of the five biggest European markets -- the UK, Spain, France, Germany and Italy -- showed that in the four weeks to 24 May, private label goods saw 1.1 percent growth. Although this remains ahead of market-wide growth, it was the worst growth period since tracking began, said the article.
"Private label gains share in a recession or when prices are up," said Scher. Consumers' reactions to higher food prices compounded by the recession means people switch to private label. But after that, and contrary to GfK's findings, some people may decide they don't like the private label version so much, or the sticker shock wears off on the next shopping trip.
Scher said that the underlying force is value; and he pointed out that it is not only the price of branded goods that increases when commodity costs are high. Since they are hit by the same high input costs, "in reality, private label products have increased in price too."
Conducted over a six-week period, the research on consumer savings tracked prices on 42 basic grocery and household items at a typical supermarket. The results indicate that consumers buying the store brand would save $40.91, on average, on the total market basket, representing savings of 30 percent when compared to weekly purchases of national brands in the same categories.
But it seems that the price difference versus national brands is not their only motivation.
A recent poll of consumers shows that the quality of store brand products is a big factor in convincing shoppers to keep buying them. In a survey by GfK Custom Research North America, 9 in 10 shoppers agreed that the store brand products they buy are as good as or better than national brand products, and the same percentage said they will keep buying store brand products after the recession ends.
In addition, a recent study by Information Resources featured in Adweek.com found that that private label popularity increased with age. Sixty-six percent of consumers aged 53 through 62 purchased store brands, and 83 percent gave the products "excellent" quality ratings. Top private-label products included bottled water, ice cream and nuts. This trend, however, was not reflected in non-food products, such as over-the-counter vitamin supplements and medications, products that older consumers had more of a reliance on than their younger peers.
Still, not everyone agrees that private label sales are on the up and up. In a FoodNavigator.com article, Eric Sher, research associate for European food at investment firm Bernstein, expressed his belief that private label peaked last summer.
His analysis of the five biggest European markets -- the UK, Spain, France, Germany and Italy -- showed that in the four weeks to 24 May, private label goods saw 1.1 percent growth. Although this remains ahead of market-wide growth, it was the worst growth period since tracking began, said the article.
"Private label gains share in a recession or when prices are up," said Scher. Consumers' reactions to higher food prices compounded by the recession means people switch to private label. But after that, and contrary to GfK's findings, some people may decide they don't like the private label version so much, or the sticker shock wears off on the next shopping trip.
Scher said that the underlying force is value; and he pointed out that it is not only the price of branded goods that increases when commodity costs are high. Since they are hit by the same high input costs, "in reality, private label products have increased in price too."