IRI Times & Trends Report
The following snapshot of consumer trends shaping the retail business is taken from the special report, “Brand Positioning in the New World Order,” issued in September 2011 by SymphonyIRI Group, a Chicago-based market research firm.
Private label accounts for nearly 23% of CPG dollar sales across retail channels today. This is an increase of almost one point versus 2008 share, but a slight decline versus share in 2010.
SymphonyIRI’s recent Private Label 2011 report clearly illustrates the fact that consumer perceptions around quality and value of private label food and beverage solutions is quite favorable. It is critical to understand, though, that perceptions around quality of private label vary across categories and across consumer segments. For instance, HispanicLink, a new study published by SymphonyIRI and Synovate, examines 15 CPG categories, and finds that in some categories, Hispanics, particularly acculturated Hispanics, view private label as much better versus national brands, while in others, the difference is smaller or non-existent.
Consumers are embracing at-home, self-reliant behaviors in an effort to save money. For instance, 36% of consumers are self-treating for simple ailments to reduce medical expenses. And, 35% are conducting more at-home beauty treatments.
During the past year, private label prices were an average 29% lower versus their nationally branded counterpart. While the average price gap varies at the department and category level, across the store, private label savings are rather noteworthy, particularly at a time when 23% of consumers are having difficulty affording their groceries. However, across a majority of CPG departments, private label prices—and national brand prices—are on the rise. On average, private label price per volume increased 5.3% during the past year.
According to SymphonyIRI’s MarketPulse survey, 36% of consumers today seek out private label solutions in an effort to reduce their CPG budgets. The fact is, nearly everyone buys private label in at least one category during the course of the year. But, private label sales are generally quite concentrated. The top 50 CPG categories currently account for just over two-thirds of private label sales.
Private Label Channel Share
While retailers across channels are working to strengthen their private label programs, performance at the channel level varies rather markedly. Today, private label share is largest within the grocery channel, but, within the grocery channel, private label share of sales slid 0.6 points during the past year.
Still, grocers are working hard to continue to strengthen and grow their private label programs and to maximize the return on investment on these efforts.
One example of a major private label launch during the past year is the My Essentials launch, by Delhaize. This product line encompasses more than 500 staple items, which will be sold through the Hannaford, Food Lion, Harvey’s, Bloom and Sweetbay banners. The line seeks to compete with offerings in Walmart, Target and Aldi—each of which contribute to the strong private label momentum witnessed in the mass/supercenter channel.
Within the drug channel, private label share of sales fell sharply during the past year. Some of these declines occurred in health-related categories. For instance, within the channel private label share of vitamins and internal analgesics fell 3.2 points and 4.4 points, respectively.
Sizable drops occurred in the beauty department. During the past year within the drug channel, private label share of soap and blades each fell more than five points.
Department Share
Private label unit sales declines are occurring across most CPG departments. The home care department, however, is seeing both unit and dollar share slide.
It is the home care department, too, that is seeing the most significant shifts in private label share. During the past year, unit sales fell one half point, while dollar share slid 0.2 share points. While these declines are not major, they do underscore the change in the tides of private label. In this department, which has been hard hit by conservative purchase behaviors in the form of scaling back and trading down, some national brand manufacturers are stemming losses, while others are turning the tides completely. For instance, while private label gained ground in the dish detergents category, noteworthy slides are seen in the laundry detergent and cleaning tools/mops/brooms categories.
In these categories, volume share fell 0.9 and 0.5 points, respectively.
The home care department has been very promotion-focused during the past year. In some of the categories where national brands have turned around private label share growth trends, it is these promotional efforts that are contributing to share gains.
Up & Coming
Penetration is also on the increase among the categories where private label share is currently below average, but on the rise. Forty-two of the top 100 CPG categories fall into this “up and coming” private label development quadrant.
In this quadrant, the largest private label share jump is evidenced in the ready-to-drink coffee and tea category. Here, private label share is still rather low, at less than 10%, but it is increasing rather quickly.
The most sizable jump in penetration within this quadrant is seen in the salty snacks category. Here, private label share is also on the low side, at about 16%, but share increased rather sharply during the past few years.
This multi-year trend is to be closely watched. While gains of just over six points during the past three years are noteworthy, SymphonyIRI’s 2011 State of the Snack Industry research indicates that two-thirds of snack consumers are actually looking to purchase their preferred brands, rather than trading off to other brands or private label solutions.
Particularly during these difficult economic times, though, value is absolutely essential. Additionally, snack consumers are clearly communicating that they are tired of having to work hard to find value. In a rather sizable shift during the latest two-year period, more than one in four snack consumers is looking to buy their favorite snack brands at a reasonable regular price rather than having to “sale shop” to find their brands on special promotion.
The lesson being communicated in the snacking sector is one that should be clearly heard throughout the grocery store: consumers are looking to CPG marketers to help them live well by providing CPG solutions that offer a solid value every day, not just when on promotion.
The message is one that applies to brand name and store brand marketers alike. Effective pricing strategies are essential, and those strategies must be frequently re-examined in light of the ongoing evolution of market and consumer trends.
