“Private Label vs. Brands: An Inseparable Combination” is a new report from Rabobank, a Dutch international financial services provider, indicating that store brands, also known as private label products, could see their global market share double to 50% by 2025.
For years, it has been an accepted fact of life in the brand world that store brands have their place on store shelves, right next to the brand name products with which they compete.
During recessionary times, store brands typically gain in market share. Last year, for example, some 84% of U.S. shoppers bought store brands and 93% of those who purchased store brands said they would keep buying them even after the economy recovers. In the U.S., almost one in four products sold in supermarkets are store brands, according to Consumer Reports.
Even more significant, consumers are beginning to not only accept but to trust store brands.[more]
Market research firm Mintel says that 44% of consumers consider the quality of store brands to have improved in the past five years. Food Navigator-USA reports that “in 2010 market research repeatedly showed that store brands were retaining market share, and some have speculated that increased quality and innovation in the sector is changing consumer perception.
While the Rabobank report will surely set off alarm bells for traditional brands, it did suggest that there will continue to be a place in the consumer’s mind and heart for leading brands — those brands that sit atop their categories.
“Neither retailers nor consumers can do without these reference products,” says the report. “Consumers need brands to benchmark the price competitiveness of their supermarket. Food retailers need the A-brand as the price and quality anchor for each product category.”
The real victims of store brands are likely to be “B-brands.” They will need “innovation or cost leadership” in order to survive the private label brand competition.
Sebastiaan Schreijen, associate director of Processed Food & Retail at Rabobank said, “Our research shows that private label and A-brands are an inseparable combination… This report is an early warning to B-brand suppliers to adapt their strategies to survive.”
Private-label brands, such as those from Wal-Mart and Kroger in the US, Tesco and Asda in Britain, Aldi in Germany and Carrefour in France, not only currently make up about 25% of the food sold in grocery stores.
“Their private labels,” as Reuters notes, “often carry lower price tags than branded goods from manufactures such as Nestle, Kraft Foods and Unilever.”
Schreijen also told Reuters that even as private brands gain market share, leading national brands will keep their market position and gain in importance, as they stand as reference points for price and quality for each product category.