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5/22/2008
IRI Report: The Battle for Private Label Shoppers Intensifies
Traditional Grocers’ Private Label Share at Risk as Competition Intensifies from Other Channels
CHICAGO, Nov. 18, 2005 — Though traditional retailers have long had the corner on private label targeting the value conscious shopper, increased private label competition from value channels threatens their share. According to a recent study by Information Resources, Inc. (IRI), supercenters, mass merchandisers and club stores are increasingly staking their claims across the private label landscape and potentially signaling the emergence of an intensified cross-channel battle for private label shoppers. IRI is the leading provider of enterprise market information solutions for the consumer packaged goods (CPG), retail and healthcare industries.
The report, entitled “Times & Trends: Private Label: The Battle for Value-Oriented Shoppers Intensifies,” analyzes recent private label spending trends and highlights competitive strategies for manufacturers and retailers.
“The image of private label has changed in consumers’ minds from purely a low-price option to a set of products that offer quality and value,” said Janet Eden-Harris, executive vice president and global chief marketing officer, IRI. “As these products are increasingly being stocked and promoted within value channels, traditional retailers must begin to look for ways to stay ahead and even reposition their house brands as the best of both--quality and value.”
Private Label Overview
Demonstrating today’s high demand for value, the report revealed that U.S. consumers are allocating nearly 16 percent of their CPG budget to private label products. But that percentage hasn’t changed much in the past two years. Overall, private label share gains have been slow and steady at best, with all-outlet private label dollar share increasing only three-tenths of a percent and volume share within food categories actually declining slightly during the past two years.
In terms of channel movement, Wal-Mart and the supercenter channel have increased their emphasis on private label sales, raising dollar and volume share to equate traditional grocery. Mass merchandise, club and dollar stores all presently hold below average private label shares; however, both mass and club have significantly increased their shares during the past two years.
This heightened focus on private label within value channels has placed additional competitive pressure on traditional retailers. Though the drug store private label business is thriving within this environment, due to less overlap among core drug store and value channel consumers, grocery private label share is essentially flat. The IRI study predicts that cross-channel private label competition will only intensify during the next several years and foresees grocery ramping up private label development and marketing and seeking other sources of differentiation, such as niche product offering and greater focus on fresh foods.
Competitive Strategies
According to the report, private label development and performance vary significantly across categories. In roughly one-fifth of the top 100 categories, private label has a strong and growing position; however, in an equal number of categories, above-average private label share is being seriously challenged by branded products. Alternatively, in more than one-third of the categories, private label has a relatively small presence that is increasing. The IRI study concludes these trends confirm the critical importance of evaluating private label risk and opportunity at the category level.
Further dissecting the marketplace, the study highlighted several categories in which brand manufacturers captured share in private label strongholds through innovation (e.g. ice cream and natural cheese) and other strong private label categories in which retailers protected and increased share through increased trial, repeat purchases and merchandising activity levels (e.g. cups and plates and gastrointestinal tablets).
Additionally, the report outlined those price-sensitive categories that are currently experiencing an increase in private label share in part because of decreased branded product merchandising (e.g. facial tissue and toilet tissue), as well as those categories struggling to increase private label share as value channels offering low prices on name brands hold an above-average share of total category spending (e.g. light bulbs and batteries).
Both manufacturers and retailers have opportunities to gain share through proper identification of specific private label purchase occasion conversion opportunities. Specifically, retailers must carefully evaluate private label opportunity and optimal mix of branded and private label products by category and by store to maximize category and store profitability. Conversely, manufacturers must concentrate on store-level competitive tactics across channels and innovation to capture more share for manufacturer brands.
The complete report can be found in the Thought Leadership section of the IRI website (www.infores.com).
About the Report
Findings presented in “Times & Trends: Private Label: The Battle for Value-Oriented Shoppers Intensifies,” are based upon an extensive analysis of consumer data from the IRI Consumer Network™ Household Panel, the IRI MarketInsight™ solution for Wal-Mart and scanner-based sales tracking data across food, drug and mass channels (excluding Wal-Mart) from IRI Infoscan® Reviews.
About Information Resources, Inc.
Information Resources, Inc. (IRI) is the world’s leading provider of enterprise market information solutions and services, empowering its clients to grow their business profitably in a complex marketplace. Driving the transformation of the consumer packaged goods (CPG), retail, and healthcare industries, only IRI provides a unique combination of real-time market content, advanced analytics, enterprise performance management software, and professional services. The company’s portfolio of services, solutions, and technology enable leading retailers and their suppliers around the globe to see what they are missing, act faster with greater confidence and win at the shelf. Ninety-five percent of the FORTUNE Global 500 in CPG and retail leverage IRI to power their business. For more information, visit www.infores.com.
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