Across the globe, private-label sales and shares are strongest in commodity-driven, high-purchase categories and where consumers perceive little differentiation, such as among paper products and health remedies like aspirin. In these categories, private-label products can have a distinct advantage over name-brand products. On the other hand, categories where innovation and differentiation is important, national brands typically lead in sales.
A case study on two product categories—hair care and milk—helps shed light on the different factors that drive name-brand and private-label success.
Though hair-care category share varies by country, name brands consistently outperform private label. In the U.S., for example, only 2% of hair-care sales (as of September 2014) come from private-label brands.
What makes it so difficult for private label to break into the hair-care market? The category has several distinct elements that favor name brands:
Dollar share for milk varies by country, but private label often represents 40% or more of total sales in developed markets.
Why are name brands finding it tougher to compete with private label in the milk market? The category has several distinct features that favor private-label brands:
Given the size and penetration of the category, milk has strong private-label growth potential in some developing markets. More than 40% of respondents in Latin America (43%), Asia Pacific (41%) and Africa/Middle East (41%) say they are willing to pay more than average for milk because they think it’s worth it, compared with 25% in Europe and 19% in the U.S. Success hinges on retailers’ ability to convince consumers that their product is of comparable quality to leading name brands.
It’s also important to recognize that while private label holds very high shares in traditional commodity-driven products like milk, sales growth is slow as consumer demand saturates. Additional opportunities exist for retailers who look beyond commodity categories and move into higher growth categories or categories where private label share is relatively low today
The report also discusses:
For more detail and insight, download Nielsen’s Global Private Label Survey.
The findings in this survey are based on respondents with online access across 60 countries. While an online survey methodology allows for tremendous scale and global reach, it provides a perspective only on the habits of existing Internet users, not total populations. In developing markets where online penetration has not reached majority potential, audiences may be younger and more affluent than the general population of that country. Additionally, survey responses are based on claimed behavior, rather than actual metered data.