The Battle for Private Label

Competition intensifies from supercenters, mass merchandisers and club stores

Published in CSP Daily News

CHICAGO -- Though traditional retailers have long had the corner on private label targeting the value conscious shopper, increased private-label competition from value channels threatens their share.According to a recent study by Information Resources Inc. (IRI), supercenters, mass merchandisers and club stores are increasingly staking their claims across the private-label landscape and potentially signaling the emergence of an intensified cross-channel battle for private-label shoppers.

Chicago-based IRI is a leading provider of enterprise market [image-nocss] information solutions for the consumer packaged goods (CPG), retail and healthcare industries. Its report, titled Times & Trends: Private Label: The Battle for Value-Oriented Shoppers Intensifies, analyzes recent private-label spending trends and highlights competitive strategies for manufacturers and retailers.

The image of private label has changed in consumers' minds from purely a low-price option to a set of products that offer quality and value, said Janet Eden-Harris, executive vice president and global chief marketing officer for IRI. As these products are increasingly being stocked and promoted within value channels, traditional retailers must begin to look for ways to stay ahead and even reposition their house brands as the best of both--quality and value.

Demonstrating today's high demand for value, the report revealed that U.S. consumers are allocating nearly 16% of their CPG budget to private-label products. But that percentage hasn't changed much in the past two years. Overall, private-label share gains have been slow and steady at best, with all-outlet private-label dollar share increasing only three-tenths of a percent and volume share within food categories actually declining slightly during the past two years.

In terms of channel movement, Wal-Mart and the supercenter channel have increased their emphasis on private label sales, raising dollar and volume share to equate traditional grocery. Mass merchandise, club and dollar stores all presently hold below-average private-label shares; however, both mass and club have significantly increased their shares during the past two years.

This heightened focus on private label within value channels has placed additional competitive pressure on traditional retailers. Though the drug store private-label business is thriving within this environment, due to less overlap among core drug store and value-channel consumers, grocery private-label share is essentially flat. The IRI study predicts that cross-channel private-label competition will only intensify during the next several years and foresees grocery ramping up private-label development and marketing and seeking other sources of differentiation, such as niche product offering and greater focus on fresh foods.

According to the report, private-label development and performance vary significantly across categories. In roughly one-fifth of the top 100 categories, private label has a strong and growing position; however, in an equal number of categories, above-average private-label share is being seriously challenged by branded products. Alternatively, in more than one-third of the categories, private label has a relatively small presence that is increasing. The IRI study concludes these trends confirm the critical importance of evaluating private-label risk and opportunity at the category level.

The complete report can be found in the Thought Leadership section of the IRI Web site at www.infores.com.