Packaging

Store Brands Growing Rapidly, but Quality Is Key to Long-Term Success, PLMA President Says

Monday 17. November 2008 - While the nation's current economic downturn is leading to strong sales increases for store brand products, Brian Sharoff, President of the Private Label Manufacturers Association, warned that the industry must be careful to maintain high quality standards in order to insure than the gains are long-lasting.

In remarks at the trade association’s annual Trade Show held here, Nov. 16-18, Sharoff said new data shows that sales of store brand, or private label, products are climbing dramatically.

The Nielsen Company recently reported that private label sales are “on fire,” climbing 10% in supermarkets and 13% in drugstores during the past year. Total private label sales in all mass market retail channels now stand at $80 billion, up from $72 billion a year ago.

“An analysis of the past three U.S. recessions indicates that store brands make sales gains during times of economic weakness, but only hold onto these increases when high quality standards are maintained,” the PLMA executive said.

In the 2001-2003 recession, private label’s unit market share climbed from 20.0% to 21.8%. In the 1990-1991 recession, unit share for retailer brands moved up from 17.6% to 20.0%. “In both of those economic downturns, consumers tried store brands, liked them and stayed with them after the economy improved,” he explained.

The results were quite different in the recession that occurred in 1980-1982. Private label market share climbed rapidly during that period, as retailers introduced many budget-priced “generic” product lines with basic black and white packaging and low-quality ingredients.

These gains were short-lived, however, as shoppers were disappointed with the product quality and soon switched back to their favorite national brands.

“Generics have virtually disappeared from stores and now quality, assortment and innovation are driving the success of private label,” Sharoff said. “The state of the economy can create an historic expansion of retailers’ store brands, but only if the industry remains committed to offering consumers the best store brands possible.”

The improved quality of store brands is paying off. Consumer polling data shows that more and more shoppers are buying store brands on a regular basis. The percentage of “frequent private label shoppers” is up significantly, climbing to 41% in 2006 from only 12% in 1991.

PLMA’s 2008 Private Label Trade Show is the nation’s largest marketplace for store brand products. Over 4,500 visitors attend the show annually, including buyers and executives from virtually every major retail chain and wholesaler.

The show, held at Chicago’s Rosemont Exhibition Center, presents more than 2,000 exhibit booths from the leading manufacturers of private label products. All major product categories are represented, from food and beverages to health and beauty care and household.