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Report: Private Label Sector Continues to Thrive
January 9, 2012
2 Min Read
WASHINGTONOver the past 20 years, private-label food products have grown steadily in sales and often directly compete for market share with national brands, which results in lower prices and increased product choices for consumers, according to a new report released by USDAs Economic Research Service (ERS).
The report, The Relationship Between National Brand and Private Label Food Products: Prices, Promotions, Recessions, and Recoveries", analyzes the relationship between private label and national brand product prices and in-store promotions for two major U.S. grocery store chains during the 2007-2009 recession and the year following the recession (2010).
The report found retailers promote private-label products strategically in response to national brand pricing promotions to protect private-label market share during national brand promotions. However, the extent of the retailer response varies widely across supermarket departments and is also affected by both the density of food stores and the market share of supercenters within a market area. The findings hold true regardless of the state of the economy, although the magnitude of the interaction between national brands and private labels differs in times of recession and recovery.
Other key findings include:
On average, private labels are priced about 23% lower than name brands, both with and without promotions. This gap is smaller than that found in previous analyses using older data, suggesting the items may have become more comparable in price and quality over time.
Name brand/private-label promotional interaction was strongest among processed, storable products, but much weaker for produce, fresh meat and seafood.
In general, as market concentration increased within an area, the intensity of within-store name brand/private-label promotional interaction also increased.
Name brand/private-label promotional interaction lessened, however, as the market share of supercenters increased, which may be due to supermarkets focusing on everyday low prices generally, rather than on promotions, when competing with supercenters.
Promotional activity for name brands changed very little during the recession, while private-label promotional activity increased.
Click here to read the entire report.
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