Todd Hale, Senior Vice President - Consumer & Shopper Insights
A fellow Nielsen associate recently sent me an article she had received from a client about how private label was receiving high acceptance among even affluent American households. While I am a huge fan of the attitudinal insights from consumer survey data, I am also a huge fan of the behavioral insights from consumer panel data. The best of both worlds is when we get to integrate both data types in our analytical work in the consumer packaged goods industry. But turning back to the issue regarding private label development among more affluent households, if we examine annual private label buying over the four year period from 2004 through 2008 in the U.S., we find the following:
1. The top two income brackets in our analysis (those with incomes of $70,000 to $99,999 and $100,000 +) demonstrated the biggest increase in private label dollar sales moving from 32.1% in 2004 to 35.0% in 2008.
2. However, this growth is really a function of population growth, not an increase in demand. That is, when we divide the percentage of dollar sales from affluent households by the percentage of household population they represent, we get an index of 102 in both 2004 and 2008. In other words, the growth in dollar sales among these households was commensurate with their overall increase in population importance (growing from 31.5% of households in 2004 to 34.3% in 2008). A variance of 2% in both years says these consumers buy private label in proportion to their population base and nothing has changed.
3. Drilling down into more finite income groups, private label development (again, expressed as an index of sales over population importance) is lowest among the lowest and highest income groups and there has been minimal change over the past four years. Private label sales development indices in 2008 ranged from a low of 88 for households with incomes of $20,000 or less to a high of 107 for households with incomes between $50,000 and $69,999. With annual private label penetration near 100%, it is not surprising to see little variance across the income groups. In other words, private label has somewhat universal appeal across all income groups, but households with incomes between $50,000 and $99,999 show the greatest positive variance from expected levels.
In other Nielsen Wire articles posted this year, we discussed how more affluent consumers are taking advantage of value retailers (club stores, supercenters and dollar stores) at a more rapid rate than other consumers and affluent consumer were also seeking out promotions at a greater and faster rate than other groups. With brands driving most of the in-store promotions and accounting for almost 80% of unit sales in food, drug and mass-merchandisers (including Walmart), affluent consumers are speaking through their buying habits, and brands are still their preferred choice. However, with the increased importance placed on price, value and promotion support, manufacturers must continue to innovate and drive a point of differentiation versus the increased innovation, focus and marketing support retailers are putting behind their private label initiatives.
For further information or to arrange a comprehensive presentation on consumer shopping patterns, please contact Todd Hale at [email protected] or 859-905-4615.