Industry Trends
INDUSTRY TRENDS Private Label Leverage GROCERS ARE FINDING THIS A GREAT TIME TO INTRODUCE NEW STORE BRAND LINES By Dan Bolton Natural Food Network Editor C onsumers are buying private label products at a blistering rate according to market researchers. Two years into the worst downturn since the Great Depression seems the perfect time to reap the benefi ts of in-store brand off erings. Sales of national brands grew at half the 9.3 percent pace set by private label brands in 2008. Growth of store brands remained strong through the fi rst half of this year. Th e Nielsen Company's study found U.S. Store Brand Development that both private label dollar and unit sales signifi cantly increased during the year ending in mid July. Brandweek, which is owned by Nielsen, reported that dollar sales grew by 7.4 percent to $85.9 billion within food, drug and mass-merchandisers (including Walmart). Growth peaked in 2008 and slowed slightly in 2009 with falling commodity prices and increased retail discounting, according to Nielsen. Unit sales similarly experienced high growth during the same period. Sales increased by 5 percent to 39.5 billion units and unit shares rose by 1.3 points (a total of 17.5 percent), according to Nielsen. Mintel International analysts tallied 1,800 new U.S. private label foods since January. Th e fi rm's Global New Products Database indicates 27 percent of all food products introduced this year are store brands compared to only 13 percent in 2005. Not only have private label introductions increased, but product innovation is reaching unprecedented highs, says Krista Faron, senior analyst at Mintel. Retailers no longer only launch `me-too' products to compete against major national brands. Instead, private label lines are hotbeds of creativity, driving markets as trend leaders, said Faron. Nielsen reports every store brand food and non-food category experienced better performance versus brands, but edible departments saw the greatest uptick in both dollar and unit sales. In March Wal-Mart re-launched its Great Value line with 80 new products and a new look. Wal-Mart has 5,250 products in 100 categories and is by far the largest American grocery brand by sales and volume, generating about 16 percent of the company's revenue. Private label sales at Kroger, the nation's second largest grocer accounted for 27 percent of fi rst-quarter revenue. Even convenience chain 7-Eleven added 100 private label products to its 7-Select line. Driving sales is the fact that more than half of American families are spending less at restaurants, opening a window for in-home meals that boast restaurant quality and fresh ingredients. Portable, high-quality lunches are another hot area of private label development, says Mintel Analyst Faron. Value-focused grocers are also extending private label lines to combat discounters and retain customers who are trading down, notes Verdict Research in its Private Label in Retailing 2009 report. Home related items are a signifi cant opportunity for private label development of eco-friendly and energy effi cient products, according to Verdict. Th ese products appeal to changing consumer attitudes for more sustainable products, while producing higher margins, according to the report. Store brands typically rise in a down economy with consumers returning to their favorite national brands as their fortunes improve. Th is time it will be diff erent according to Mintel which forecasts spending on private label products will grow 8.1 percent by the end of 2009. 8 Natural Food Network