Private Label Growth Surpasses National Brands in 2017
Private label brands have experienced substantial growth in just the past year, which many experts attribute to retailers’ ability to provide premium, healthful store brand products that are also convenient, flavorful, and affordable.
Within the United States consumer packaged goods (CPG) market, private label growth experienced a dramatic rise in 2017, posing an increasing threat to national brands. As the “War on Big Food” continues, many consumers have found that private label brands are providing compelling alternatives that address their needs for more premium, healthful products that are convenient, flavorful, and affordable. (1,2) One study by CPG marketing and sales agency, Acosta, indicated that there is an average price gap of approximately 20% between private labels and national brands, putting pressure on food manufacturers to compete. (3)
In Nielsen’s latest “Total Consumer Report,” private label sales have surpassed those of national brands, with no indication of slowing anytime soon. Projections by Nielsen also indicate that dollar share for the private labels could reach 25.7% by 2027, meaning the category would experience a growth rate of more than 8 percentage points during the next decade. (1) If this trend continues as expected, the U.S. CPG market will likely transform to be more reflective of European markets, where private labels generally dominate the grocery scene, accounting for around 45% market share in some regions. (1,2)
Though private label growth has been substantial in the past year, Acosta still suggests that shoppers perceive national brands as superior to private label brands in most categories. According to its research, grocery store runs that are driven by national brand purchases are 65% more valuable, on average, than private label grocery runs. (3) Another study by Trace One uncovered that nearly 44% of consumers won’t buy private labels due to a lack of trust compared to national brands. (4)
The numbers show that for now big national brands still have the upper hand overall in the U.S. food market, but the margins are diminishing. The heightened success of private labels in just the last year is greatly due to retailers’ ability to respond to consumers’ changing perceptions and adapting market trends, while food processors are finding it difficult to keep up. More and more private labels are differentiating, innovating, and diversifying their products with regard to quality and nutrition. In order for large food manufacturers to stay competitive with retailers, they’ll need to move fast and respond to their audiences’ demand for innovation. For most food categories, this means investing in more healthful offerings without sacrificing flavor. (1, 2)
Sources:
- http://www.nielsen.com/us/en/insights/reports/2018/total-consumer-report-march-2018.html
- https://www.foodbusinessnews.net/articles/11915-private-label-gaining-share-in-snacks
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https://www.acosta.com/news/new-research-from-acosta-reveals-the-importance-of-national-brands-to-retailer-success
- As reported in as reported in FoodDive https://www.fooddive.com/news/grocery--national-brands-may-lose-out-as-private-label-products-grow/447689/