Insights

Private Label Outlook: US and Canada
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Private Label Outlook: US and Canada

In two separate reports, Nielsen looks at the impact the economy has had on consumers and private label growth in the U.S. and in Canada.

In the U.S., the not-so-Great Recession turned into a windfall for private label, stimulating consumer interest in and directing retailer focus on store brands. But since the end of 2008, private brand share growth has flattened as brands stepped up their promotion support and innovation efforts.

Looking ahead, while store brands are overdeveloped in commodity-driven categories, retailers are responding by venturing into new territory such as health & beauty and even alcoholic beverages. By applying a new rigor to the store brand management process, retailers will borrow a page from the national brand playbook, continuing to grow their private label offerings guided by consumer research, product innovation, tiered pricing (for some) and proactive brand teams.

Once the exclusive purview of value-conscious shoppers, store brands have achieved mainstream status among most consumers by narrowing the price and quality gaps that once demarcated national brands and private label.
 
Store brand purchases jumped nearly two share points to a new share plateau during 2008 as the recession intensified, showing no signs of abating. Entering 2009, consumers were caught in an economic vise with earnings fixed or declining, employment shrinking and food costs rising five to six percent. Private label share gains flattened from 2009 to 2011, in part because manufacturers increased their promotional activity and innovation efforts to protect their share positions and drive growth.

While a number of retailers either re-staged or launched new private brands during this time, one could hypothesize that the stagnant share resulted from a lack of retailer rigor in building or maintaining their store brand offerings. Or, sluggish store brand growth may represent the failure of an attempted “build it and they will come” strategy.

Open just about any cupboard in Canada, and you’ll find a private label product on the shelf. Despite posting $11.6 billion in sales and achieving nearly 100 percent penetration, Canadian private label products lagged behind total market growth as of August 2011.

National brands managed to fend off the private label onslaught in Canada thanks to a savvy pricing strategy coupling regular price increases with dramatic temporary price reductions that narrowed the gap between private label pricing and promotional national brand pricing to less than ten percent. In some cases, aggressive national brand promotional prices lasted for extended periods of time, sometimes two or even three months, with the unintended effect of teaching consumers to wait for deals.

Value-oriented Canadian consumers deployed an entire portfolio of penny-pinching strategies, with buying private label relatively low on the list, behind shopping sales, using coupons, stocking-up during promotions and store hopping for best prices.

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Private Label Outlook: US and Canada

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