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Ben Ball

Senior Vice President
Dechert-Hampe

PLBuyer: U.S. Private Label Forecast Revised Higher

November 7, 2012

FROM RETAILWIRE:
A new report from Rabobank International predicts that U.S. private label share will reach at least 25 percent to 30 percent by 2025, and could be as high as 33 percent. Do you see private label penetration in the grocery category accelerating over the next decade?      [more...]

MY COMMENTARY:

An Rx company recently asked me to brief their execs on the CPG industry. My materials search turned up a year 2000 version of the primer on the state of the industry presentation that I have updated and used many times over the years. One of the slides was a prediction of the "state of the industry" in 2010. For fun, I graded the exam.

I got four out of five major predictions right. The one I missed was a prediction that Private Label would be 35% of U.S. Food and HBA retail by 2010. My basis for the prediction was a five year U.S. PL growth trend and a comparison to the PL levels of countries ranging from Australia to Canada to Europe. Totally wrong.

Why? And will it be different now?

I see two major differences in the U.S. PL market -- particularly food -- and others.

One is that retailers in the U.S. largely continue to view PL as a value play. (Witness the attribution of recent gains to "the recession.") They simply have not evolved to the idea of Proprietary Brands yet. Proprietary Brands innovate on their own. Proprietary Brands are often price parity or even leaders -- not price followers.

The second is the fragmentation of U.S. consumers. We are still a nation with many first or second generation immigrants who tend to cling to brand loyalties or prefer national brands. We are also a nation accustomed to both affluence (relative to the rest of the world) and the choice affluence affords. We don't "trade down" unless we either discern a true lack of value in the national brands (milk, meat, etc.) or simply have to for temporary economic reasons.

To achieve 30% market share, retailers are going to have to become brand developers and marketers. They aren't there yet.

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