Through a special arrangement, what follows is a summary from a current article from PLBuyer, presented here for discussion.
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.
The reason? A shift in power from consumer packaged goods companies to food retailers, as well as consumers gaining trust and loyalty with innovative and higher quality retail brands.
"Some good product categories and national brands are more vulnerable to this shift than others," said Nicholas Fereday, the author of the report, titled What Would Apple Do? "But the game has changed and the attraction of retailer brands is ever-increasing, even for confectionery and snacks. For national brands, innovation and adaption are as essential as ever for survival, but bold and risky initiatives are required to hold back the retailer brand onslaught."
Mr. Fereday said in the report that once retailers got a foothold with their private label products in a category they rarely slumped. From 2010, he said private label sales have grown faster than national brands by 2-3 percent annually as retailers were "learning to give consumers what they want through greater investment in product innovation and category management. In short, retailer brands are growing both in and out of recession."
And he expects that trend to continue, economic malaise or not.
"Today, retailer brands claim about a 16 percent to 19 percent share of the retail food market," the report said. "Extrapolating from recent growth rates, Rabobank expects to see retailer brand market share in the U.S. approaching today's European levels of at least 25 percent to 30 percent within the next decade. In volume terms, this translates into roughly one in every three food product purchases being a retailer brand."
However, the upward revision in U.S. private label sales from a year earlier will not change the group's global expectation of 50 percent private label share by 2025. Fereday said that conclusion matched with recent comments by Tesco CEO Philip Clarke, who said there was a natural limit to retailer brands of 30 percent to 50 percent, because consumer choice would be curtailed beyond those levels.
Mr. Fereday also said the growing penetration in private label of new forms of retail, including hard discounters such as Aldi, as well as dollar stores, was "a less appreciated source of retailer brand growth."
What percentage of food sales will go to private label by 2015?