Will Private Label Continue to Beat Brand Names?

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Will Private Label Continue to Beat Brand Names?

 In the just completed shopper research on private label usage conducted by Perception Research Services (PRS), fewer shoppers reported purchasing private label products on a regular basis, compared to the last wave of research conducted in July 2010 (84 percent vs. 94 percent), but those buying private label goods are buying more of it (average number purchased up 25 percent from 4.8 to 6).

Paper products continues to be the leading private label category purchased, with increases evidenced across almost all categories, and the largest seen for cereal (+20 percent), cleaning products (+19 percent), cookies and frozen meals (both +14 percent).

These findings coincide with recent optimistic economic indicators, including the latest report from The Conference Board showing an increase in their Consumer Confidence Index, after seeing a major decline in July. In addition, the latest GDP figures are up, as are reported sales at U.S. retailers -- the most in 7 months.

However, the data suggests that while the penetration of private label usage may have peaked, a significant portion of "triers" have been converted to "believers" who now choose the private label alternative for more types of products.

"We're seeing a new paradigm in shoppers' attitudes -- forced to seek less expensive alternatives for economic reasons, and having found satisfying options, they now need a compelling reason to pay more," says Jonathan Asher, senior vice president of PRS.

"These trends point to some interesting challenges and opportunities for both retailers and national brand manufacturers," Asher continues. "Retailers cannot sit back and assume that economic conditions alone will lead to an ever-increasing share-of-market for their own brands. They must continue to invest in their brands as they have during the past few years, improving their product offerings and the packages they come in."

"And for national brand manufacturers, the need for innovation has never been more critical. Shoppers must be given a meaningful reason to pay more. And as the economy continues to improve, they will likely be increasingly eager to find those small indulgences with which they'll be happy to reward themselves, at long last."

The four waves of this research were conducted in May, 2009, and January, July, and November, 2010, across the United States, among roughly 600 primary household grocery shoppers aged 18-64. To learn more, visit www.prsresearch.com.