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Nielsen sizes up opportunities for private label brands

Editor’s note: The Supply Side section of The City Wire focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by The City Wire and sponsored by Propak Logistics.

Roughly $1 out of every $5 spent by consumers goes to private label or store brands. Nielsen recently reported these private label sales hit $112 billion last year and continue to grow faster than other store categories on average.

Nielsen said store brands account for about 18% of retail sales, but the stat varies widely across certain categories. Private label brands have the largest penetration in food and beverage categories with a 25% or more share in one-third of the categories.

The report found that in non-food categories private label had less market share penetration. Nielsen shows just nine of the 49 categories have 25% or greater share in private label. Just two of the top 10 selling categories for private label were non-edible — paper products and medications, according to the report.

Top Selling Categories for Store Brands
Milk
bread
cheese
fresh produce / meat
sugar
cooking oil
eggs
frozen dessert toppings
paper products
medications

Nielsen said even though many edible categories do well, six of the top 10 lost market share between 2012 and 2013. The market research firm said brand manufacturers and retailers should be on the lookout for new product categories as they emerge.

Researchers warn that not every category is a good fit for private label saying it’s important to consider the marketing muscle behind big beer and hair care products brands and whether store brands might be able to stand up to it.

“So sizing up the competitive arena (number of brands) and category essentials — market size, growth trend and production costs — are key considerations before jumping in the ring,” noted Todd Hale, author of the study and senior vice president of consumer & shopper insights at Nielsen.

Hale also notes that premium store brands are influencing consumer perceptions. He said while consumers are interested in store brands their attitudes about them have been elevated in recent years.

“The overall perception of store brands has shifted to some degree. Notably, fewer consumers today think store brands are for people on tight budgets,” Hale said in the report.

As retailers have invested more in premium store brands, Nielsen finds more consumers recognizing quality and value in these tiered private label products, buying more of them and shirking name brands. Nielsen encourages retailers and manufacturers to get to know their store brand fans because they are typically big spenders.

“Top store brand buyers spend three times more per year than all other store brands buyers. They’re big spenders mostly because they make about twice as many buying trips per year, but they also spend $7 more per trip and are less deal prone than all other buyers who purchase store brands less,” Hale said in the report.

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He said national brands still dominate overall spending, but those consumers who favor private label will spend more than one-quarter of their shopping dollars on store brands. This is a 10-point share swing compared to other shoppers who purchase store brands at a more moderate rate. Nielsen said retailers need to make sure they are focused on those shoppers new to private label products. But more importantly, they have to keep their existing private label fans happy.

“Top-spend store brand buying households represent about one-fifth of annual buyers and account for 43% of store brands sales. Losing one of the top spenders will be more detrimental to your business than winning a new store brands buyer,” Hale said in the report.

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