Private-Label Brands Winning The Retail Sales Game

NEW YORKOver the past decade, annual sales of private-label products increased 40% in U.S. supermarkets, and new market data from Accenture finds store brands continue to win at the retail level with consumers looking to save money. In fact, 64% of U.S. shoppers surveyed said private-label brands comprised at least 50% of their groceries, and 39% said they have increased their purchase of store-brands in recent years as a result of the tough economy.

The data is in line with statistics from the 2011 Private Label Manufacturers Associations (PLMA) Private Label Yearbook that found private-label sales increased by $1.2 billion and accounted for 100% of the growth in supermarkets.

The Accenture study of 500 U.S. consumers found price remains the key factor in the majority of store-brand purchases. Sixty-six percent of shoppers said they buy store-brands because they are cheaper, while 87% said they would buy more brand-name products if they were offered at the same price as the comparable store brand. More than half said that it would take a permanent price reduction of the brand-name product (to the same price as the store brand) to persuade them to return to purchasing the brand-name product.

"Undoubtedly, uncertain economic times are a major factor in the growth of private label, but it is the increased sophistication of stores' own brands that has helped them retain customers," Bob Berkey, from Accenture's Consumer Goods & Services practice. "Consumer goods companies must create a clearly defined private-label strategy that understands the unique attributes that drive preference and loyalty in their consumer, engages with them across multiple channels and creates an excellent customer experience."

The study found the growing perception of trust, quality and preference for private-label products should be of most concern to consumer goods companies that are competing with stores for the same shelf space. In fact, 50% of consumers surveyed buy store-brand products because they perceive the quality to be just as good as the brand-name equivalent; 42% buy a private-label product because they "trust" that particular store's brand; and 28% simply prefer the store-brand product to the brand-name product. Only 9% claimed not to buy store-brands because they felt that the quality or taste was inferior to the brand-name product.

"Consumer goods companies must respond to the threat of increasing competition from store-brands as market position and profitability are at stake," Berkey said. "Extreme competition between retailers and consumer goods companies can result in inefficiencies and waste for manufacturers and retailers, and undifferentiated products for the consumer. Consumer goods companies must develop a balanced strategy of collaboration with retailers in some areas and competition in others.