Report Finds Growth Opportunities for Private Label Products

While market share for private label products may be stalling, it’s essential to understand habits of the core shopper.

January 21, 2015

CHICAGO – There is no question that private label products became more popular as consumers looked for new ways to save on everyday purchases during the recent economic downturn. According to a new report from IRI, U.S. consumers spent $120 billion on private label products during the past year, a year-over-year increase of about 2%. However, that growth now seems to be leveling off, providing CPG marketers with new opportunities.

The latest IRI Times & Trends report, “Private Label and National Brands: Dialing In on Core Shoppers,” addresses the issues and opportunities for retailers in marketing private label brands to consumers.

“Shoppers have endless choices today, which makes purchasing decisions much more complex,” said Susan Viamari, editor of Thought Leadership, IRI. “Having both national and private label brands on retail shelves is critical to creating a solid value proposition, so the challenge for marketers now is to figure out how to tailor their assortments with highly targeted products and marketing programs that keep value and affordability in the crosshairs.”

Consumers are continuing to base brand selections on affordability, with one-third of shoppers consciously seeking out private label products to save money. But, value does not necessarily mean “the lowest price,” and affordability means something different to each unique shopper. It’s essential to understand what “affordability” means to shoppers generally and at the moment of purchase.

National brands are still on top in the drug channel, with dropping private label share of spending within the channel to 16.6%. National brand innovation has also been strong in beauty and vitamins. Private labels are strong in the mass/super channel, frozen departments and refrigerated departments.

One strategy for building penetration is to fracture concentration. Today, the top 50 CPG categories account for 64 percent of overall CPG dollar sales. The private label sector is slightly more concentrated, with the 50 largest categories capturing 67 percent of total private label sales. CPG marketers can fracture concentration and reap sizeable revenue rewards with outside-the-box product launches that allow them to compete in new categories.

Read more about 7-Eleven’s new line of private label over-the-counter health products in the January NACS Magazine Category Close-Up on health and beauty care products.

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