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Private label sales are going gangbusters nationally, but that’s no excuse for dropping the ball on high quality standards, cautioned Brian Sharoff, president of the Private Label Manufacturers Association, speaking at the trade association’s annual conference in Chicago this weekend.
While the nation's current economic downturn is leading to strong sales increases for many store brand products at many operators, maintaining high quality standards is the best way to insure these gains are long-lasting, Sharoff said.
Sharoff noted that The Nielsen Company recently reported data indicating private label sales are "on fire," climbing 10 percent in supermarkets and 13 percent in drugstores during the past year. Total private label sales in all mass market retail channels now stand at $80 billion, up from $72 billion a year ago.
"An analysis of the past three U.S. recessions indicates that store brands make sales gains during times of economic weakness, but only hold onto these increases when high quality standards are maintained," the PLMA’s top executive said.
In the 2001-2003 recession, private label's unit market share climbed to 21.8 percent from 20 percent, while in the 1990-1991 recession, unit share for retailer brands moved up to 20 percent from 17.6 percent. "In both of those economic downturns, consumers tried store brands, liked them and stayed with them after the economy improved," Sharoff said.
The results were quite different in the recession that occurred in 1980-1982, when private label market share climbed rapidly as retailers introduced many budget-priced "generic" product lines with basic black and white packaging and low-quality ingredients. These gains were short-lived, however, as shoppers were disappointed with the product quality and soon switched back to their favorite national brands, said Sharoff.
"Generics have virtually disappeared from stores and now quality, assortment and innovation are driving the success of private label," he noted. "The state of the economy can create an historic expansion of retailers' store brands, but only if the industry remains committed to offering consumers the best store brands possible."
The improved quality of store brands is paying off. Consumer polling data shows that more and more shoppers are buying store brands on a regular basis. The percentage of "frequent private label shoppers" is up significantly, climbing to 41 percent in 2006 from only 12 percent in 1991.
PLMA's Private Label Trade Show is the nation's largest marketplace for store brand products. Over 4,500 visitors attend the show annually, including buyers and executives from virtually every major retail chain and wholesaler. More than 2,000 exhibit booths feature products and programs from the leading manufacturers of private label products, in all major product categories are represented, from food and beverages, to health and beauty care and household items.