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Financially strapped consumers from all income groups, even those earning $100,000 or more, are turning to private label as part of a money-saving strategy, according to two new studies from Information Resources, Inc.
The "IRI Times & Trends Report: Private Label 2008" also revealed retailers are increasingly leveraging store brands as a key aspect of their differentiation strategies.
"With budgets strained to the breaking point, shoppers are scrambling for ways to save money," said IRI consulting and innovation president Thom Blischok. "Shoppers are looking through a lens of affordability and have a re-invigorated interest in private label since the economic turmoil began. The need for affordable packaged goods solutions is high, and private label products are going a long way toward answering that need."
Private label is performing well across channels, but drug retailers are leading the way in growth, the study found. The channel is benefiting from a surge in self-care, with consumer trying to cut medical expenses by replacing doctor's office visits with over-the-counter remedies, and often choosing private label products.
On average, private label products cost about 30 percent less than their name brand counterparts, said IRI. That discount varies greatly at the department level, however; for instance, the average private label fresh/perishable item costs only 3.5 percent less than its branded counterpart, but in the beauty/personal care department, consumers can save nearly 64 percent versus a branded item.
Though nearly everyone purchases some private label products at some point, almost one-third (33 percent) of shoppers are considered heavy buyers of private label goods, up from 28 percent last year.
"The evolution of the U.S. private label market has accelerated in the face of growing financial turmoil," said Blischok. "As shoppers opt out of some products and stores, they will opt into others. It is critical for the ongoing success of CPG manufacturers and retailers to not only react to, but anticipate these trends and be ready with products, assortments and store layouts that meet the shopper's changing needs."
This private label growth extends beyond U.S. borders. According to IRI's "Times & Trends Special Report: U.S. & Europe Private Label 2008," while private label development varies across EU countries, healthy private label growth transcends international boundaries.
In Spain, for instance, private label holds 32 percent market share, posting growth of 2.4 share points versus one year ago. In contrast, Italy's private label share is lower at 13 percent, but growth is still up nearly one full share point versus last year.
"Shoppers will reward those companies that help them justify continued spending on the brands they prefer, while empowering them to save money with private label products where it makes sense," said Blischok.
To view both reports click here.