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"Survival is the main driver for retailers to move to private label," says Brian Sharoff, president of New York-based Private Label Manufacturers Association, which will hold its annual conference, "PLMA Store Brands 2025," Nov. 14 to Nov. 16 in Chicago. "Grocers without private label will have to think twice about how they will compete, because it will not be on price."
Volume numbers indicate that retailers are honing their survival instincts: Sales of private label have grown at twice the rate of branded products over the past six years, according to ACNielsen's Private Label Trends 2004.
Retailers are expanding into new categories with private label products, says Sharoff.
"One of the most significant trends this past year has been the increased commitment to the development of ready-to-eat meals," he says. "This plays to two trends: One is the difficulty of making center store attractive to consumers. Ingredients are becoming less important to consumers, who have less time to prepare meals than ever before. The other trend is the push that has been going by other channels to take food away from the supermarket. These are best responded to by the retailer with its own brands."
Although the show looks to the future of store brands, Sharoff says it is difficult to predict what the actual private label landscape will look like, though the growth of the mega-retailer has greatly influenced the presence of private label products.
"These retailers are marketers," he says. "For example, Wal-Mart is one of the top 10 brands in the country. In a situation like Wal-Mart, the question is not whether branded products will continue to be important. The question is, will they be manufacturer brands?"
The innovations of mega-retailers are driving growth in some of the newer private label categories. Wine, for instance, has always been a small percentage of private label sales, but it began to show growth after retailers like Costco began developing their own labels. In fact, over the past five years, Costco has developed more than 400 items carrying the Kirkland Signature name, and approximately 12 percent of Costco's sales now come from private label. That's a clear example of the strength of the retailer's brand extending to its products, making consumers more willing to experiment with them.
Still, there are some products that will have minimal impact as store brands, contends Sharoff -- either because they're commodities and generate little if any excitement, or because, like sugar or flour, they have little room for growth. "There's not much value you can add to these products," he says.
The growth of private label within the mega-retailers has also driven the growth of store brands within smaller regional players, according to Sharoff.
"There are many strong regional private label players, such as Wegmans, H-E-B, and Harris Teeter," he says. "Most of these players have increased their private label share by 10 to 15 percentage points over last year, and more get involved every day."