FD Buyer: Mind The Gap!
By Todd Hale, SVP of consumer & shopper
insights, The Nielsen Company
Through a special arrangement,
presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
A Nielsen review of department-level price
gaps between store brands and manufacturer brands shows that retailers may
be hurting themselves in the long run — and missing out on opportunities
to collaborate with manufacturer partners to drive stronger category sales.
Within U.S. food, drug and mass merchandisers
(including Wal-Mart), Nielsen found considerable price gaps between store
brands and manufacturer brands, with store brands in dairy as much as 50
percent lower. What’s more, price gaps are growing in most departments.
Are you losing category dollars because of
aggressive store brand pricing or greater focus on store brand versus brands?
Department level price gaps can be driven by differences in category mix,
brand and/or size mix, so examining gaps by category and SKU is wise.
An increase of just one cent in store brand
prices translates to roughly $400 million across all departments measured
by Nielsen. In departments and categories with extreme price gaps, the potential
to enhance category sales can be significant. With the ongoing price compression
causing declining category and same-store-sales, you may be wise to think
about raising prices on some of your own brands.
Price is top of mind for all retailers, but
Nielsen’s annual Shopper Trends study
reports that strong shopper relationships are built on at least four other
equally important factors. As the economy improves, these factors will separate
the strongest grocery retailers even further from the pack. The U.S. shopper
survey, including feedback from over 29,000 shoppers across all 48 contiguous
states, found that the most successful retailers complement pricing strategies
with a strong commitment to other shopper needs. This helps them build a
stronger platform for long-term success.
The five over-arching areas that the study
identified contributing relatively equally to shoppers’ emotive equity are:
1. Store accessibility
2. Store format and wide selection
3. Pricing and value for money
4. Stocking quality products
5. Efficiency and loyalty program
The importance of these other factors also
explains why not all shoppers are doing their weekly grocery stock-up in
discount chains, despite the pressure of a recession. Consumers still want
to have a pleasant experience and there is tremendous value in making that
process convenient and easy for them.
Discussion Questions: Do you agree that
retailers are losing category dollars because of aggressive store brand
pricing or placing greater focus on private label versus national brands? What
should be the ideal pricing gap between store and national brands? What’s
the best way for retailers to “mind the gap?”