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CHICAGO, Nov. 18, 2005 -- Traditional grocers might be in danger of losing another weapon they have against supercenters, mass merchandisers, and club stores; the element of differentiation they gain from their private label franchises, according to a recent study by marketing information company Information Resources, Inc. (IRI).
In a report, entitled "Times & Trends: Private Label: The Battle for Value-Oriented Shoppers Intensifies," IRI said alternative channels are turning up with heat with their own private label programs. The study analyzes recent private label spending trends and highlights competitive strategies for manufacturers and retailers.
"The image of private label has changed in consumers' minds from purely a low-price option to a set of products that offer quality and value," said Janet Eden-Harris, e.v.p. and global chief marketing officer, IRI. "As these products are increasingly being stocked and promoted within value channels, traditional retailers must begin to look for ways to stay ahead and even reposition their house brands as the best of both--quality and value."
IRI said consumers are allocating nearly 16 percent of their CPG budget to private label products -- a percentage that hasn't changed much in the past two years. Overall, private label share gains have been slow and steady at best, with all-outlet private label dollar share increasing only three-tenths of a percent and volume share within food categories actually declining slightly during the past two years.
In terms of channel movement, however, Wal-Mart and the supercenter channel have increased emphasis on private label sales, raising dollar and volume share to equate that of traditional grocery. Mass merchandise, club, and dollar stores all presently hold below-average private label shares, but mass and club have been catching up during the past two years.
IRI predicted that cross-channel private label competition will intensify during the next several years, with grocery ramping up program development and marketing and seeking other sources of differentiation, such as niche product offering and greater focus on fresh foods.