Consumers Still Buying Private Label, Satisfaction Declining

CHICAGOThe number of U.S. consumers using private-label food and beverage products continues to rise with 27% of Americans choosing to purchase private-label products in 2011 compared to only 18% in 2000. While that is good news for some, a new report from the NPD Group warns consumer satisfaction with private-label has dipped from 32% in 2009 to 24% in 2012.

According to The Evolution of Private LabelDoes Brand Name Really Matter?," the increased usage of private-label foods and beverages in recent years may have been more a matter of necessity as a result of the economy and higher grocery prices than deliberate intention. In 2009, 34% of adults said they intended to purchase more private-label foods, but that percentage has dropped to less than 25% in 2012. This does not mean private label products have failed to make progress over the last decade since the report finds that two-thirds of adults say store brands quality is much better today than it was five years ago.

However, if food inflation declines and the economy improves, it is possible consumers may return to the name brands they know and trust  if retailers do not respond to declining satisfaction and if name brand manufacturers continue their loyalty tactics. For example, name brand manufacturers seem to be garnering more loyalty by harnessing the power of social media. Consumers who frequently use social media and apps on their smartphones claim to be more loyal to brand-name items versus their private-label counterparts. This interaction appears to be developing relationships with consumers since they are opting for the name brands, rather than generic items at lower prices.

Not all categories are treated the same by consumers when it comes to private label. While more private-label end dishes being served, consumers loyalty to private-label is still strongest in categories that are mostly used as ingredients. Flour and butter top the list of private-label loyal categories; family members and/or guests are not likely to know which brand was used in the end product. On the flip side, categories with a stronger loyalty to name brands are very likely to display the brand to the user. Examples of these categories are frozen dinners/entrees, yogurt and carbonated soft drinks.