PL Buyer: Has Private Label Hit a Plateau?
Through a special arrangement, what follows is an excerpt from a current article from Private Label Buyer, presented here for discussion.
Some recent reports have said private label sales at supermarkets have peaked as national brands have stepped up marketing. Will the pattern continue in 2012 and how will the economy affect PL growth?
Christopher Durham, who operates the mypbrand.com blog, believes manufacturer-owned brands are realizing that increasing promotional and marketing spend appears to be the only way they can attempt to maintain market share. He said, "They will be forced to continue this trend into the coming year in an effort to stop the bleeding."
Craig Espelien, vice president of consumer products at MMI, likewise said private brands will likely decline at "retailers who are focused on creating buckets of profit rather than driving private brand support." Overall, he expects PL sales will be flat to slightly down with the economy continuing to improve. He added, "Some retailers will drive share higher but most will revert to taking funds from branded companies to shore up their bottom line. There will be some retailers who treat their PL brands as "brands" — and they will reap the benefits of this support."
But Dr. Krishnakumor Davey, managing director for Symphony Consulting, sees continued growth in private label regardless of national brands’ marketing thrust.
"Private label has historically been gaining share in select categories and store sections," Dr. Davey said. "We are seeing categories where private label’s share has slowed due to increased branded innovation (e.g., yogurt). However, there are other categories where retailers are making an emphasis to develop their private label in new ways, new benefits and positioning such as seen with HBC. Retailers will continue to drive their private label offerings as a means of supporting their bottom line performance as well as differentiating from their competition. Many retailers have some very aggressive share goals and are restaging their private label business to grow their shares (e.g., Safeway, CVS, Delhaize)."
Paul Osinski, senior vice president, commercial sales, with Salient Management Co., predicted PL would show only moderate gains next year as the economy continues to struggle through the first half of 2012, although he expects more notable gains will be found at best-in-class retailers.
"The better marketers will make further gains in their PL programs by tying together specific consumer information they are gathering through panels, loyalty card data and trends to promote and develop products that meet specific needs of their various consumer segments," Mr. Osinski said.
Discussion Questions: Do you see private label growth in the food/drug/mass channels expanding or contracting in 2012? What effect will national brands’ advertising spend and the economy have on PL?