By Todd Hale, SVP, Consumer & Shopper Insights, Nielsen
Make no mistake, store brands aren’t what they used to be. Today, U.S. supermarket shoppers spend $1 of every $5 on store brands, and their sales are growing in just about every retail channel. And that spend is having a big impact, as overall private brand sales hit $112 billion in 2013 and continue to grow faster than the average of all store categories.
Store brands account for an average of 18 percent of retail sales, but that statistic varies greatly across categories. For example, 22 of the 67 major food/beverage categories have 25 percent or greater share of sales accounted for by store brands. But of the 49 major non-food categories, just nine have 25 percent or greater store brands share. So where are the growth opportunities within U.S. store brand categories? And how can store brand retailers and manufacturers influence that growth?
When it comes to top-selling store brand categories, basic edibles (milk, bread & baked goods, cheese, fresh produce, etc.) are at the top of the list. Among the 10 highest-selling categories, only two are non-edible (paper products and medications & remedies).
Edible categories also drive the list of the top 10 store brand categories in terms of dollar share, but six of the top 10 lost share between 2012 and 2013. In fact, some of the big edible categories are experiencing large year-over-year declines in absolute dollar sales. In many cases, these are in categories with declining demand—a big reason why retailers and store brand manufacturers should be on the lookout for new category opportunities.
|Top 10||Bottom 10|
|1. Milk||1. Computer/Electronic Products|
|2. Eggs-Fresh||2. Beer|
|3. Sugar/Sugar Substitutes||3. Deodorant|
|4. Wrapping Materials Bags||4. Gum|
|5. Pain Remedies||5. Tobacco & Accessories|
|6. Dessert/Fruit/Tops-Frozen||6. Canning/Freezing Supplies|
|7. Unprep Meat/Seafood-Frozen||7. Wine|
|8. Fruit-Canned||8. Liquor|
|9. Cheese||9. Hair Care|
|10. Shortening/Oil||10. Insecticides Repellants|
Not every category is a good fit for store brands. While many might see an opportunity in categories with little store brand presence, some areas are more lucrative than others. For example, consider the marketing muscle behind big beer, deodorant and hair care brands—something a store brand might not be prepared to go up against. So sizing up the competitive arena (number of brands) and category essentials—market size, growth trend and production costs—are key considerations before jumping in the ring.
We continue to see high consumer interest in store brands—but attitudes and perceptions appear to have reached a new attitudinal norm. In terms of perceived value, consumers’ sentiment has flattened in recent years after improving between 2008 and 2009. The overall perception of store brands, however, has shifted to some degree. Notably, fewer consumers today think store brands are for people on tight budgets. This is somewhat a chicken and egg scenario, because as retailers have placed a greater focus on developing premium store brands, we see more consumers claiming that the quality of some store brands products are higher than some name brands, which then encourages retailers to invest more in their premium lines.
Top store brand buyers spend three times more per year than all other store brands buyers. They’re big spenders mostly because they make about twice as many buying trips per year, but they also spend $7 more per trip and are less deal prone than all other buyers who purchase store brands less. National brands still dominate overall spending among U.S. buyers, but top-spending store brand buyers devote more than one-quarter of their dollar spending to store brands—a 10-point share swing compared with all other shoppers who purchase store brands at a more moderate level.
So when considering next steps, store brand manufacturers and retailers should examine whether they’re appropriately focused on new and existing store brands buyers.
It’s always important to seek new buyers, but when competition and variety rise understanding the wants and needs of your top spenders is essential for any retailer looking to attract anything beyond nominal gains. Top-spend store brand buying households represent about one-fifth of annual buyers and account for 43 percent of store brands sales! Losing one of the top spenders will be more detrimental to your business than winning a new store brands buyer.
Want to learn more? Download the materials from our recent private brands webinar here.