Study: National Brands Still Have The Upper Hand On Private Label Products

The expansion of private label products in the grocery industry led to new competition for popular national brands. However, a recent report from Acosta finds that although there is a significant growth in private brand sales, consumers still turn towards national brands for certain staple products. This is why national brands were found to be driving the majority of sales and revenue while leading the largest and fastest growing areas of a supermarket.

This trend might be because of a perception gap in certain product segments as consumers decide what products are higher in quality. According to the report, the more personal, innovative and differentiated a category is, the more likely a consumer would select a national brand over a private label brand.

However, Acosta’s research found that the top 10 products that consumers “mostly” or “exclusively” purchase under national brands were personal care products such as toothpaste, antiperspirant, shampoo/conditioner, skin care and laundry care. The only edible products that consumers prefer to exclusively buy under national brands were found to be candy/chocolate, soft drinks, and pet food.

In contrast, the top ten private label products that consumers claim to “mostly” or “exclusively” purchase were food products such as milk, bottled water, bread, sugar/sweeteners, prepared foods, canned vegetables/fruits, cheese, butter/margarine, coffee creamer and pasta.

This purchasing behavior is primarily because of the extensive reach private brands have in store. Major retailers have expanded their private label products to be available in nearly every section of a grocery store. However, private label brands have been experiencing a slight decline (- 5 percent) in sales between 2016 and 2017 because of this expansive reach. Due to this declining trend, Acosta finds that retailers are too focused on expansion rather than focusing on important categories.

Additionally, private brands are priced a lot lower than they should be, according to Acosta; the average price difference is about 20 percent. In fact, for every one percent of unit volume that shifts to private brands, there is a loss of $1.5 billion in sales revenue for retailers on average, according to Acosta.

With the average private label product decreasing in price by nine percent from 2014 and continuing to decrease in price year after year, retailers seem to be introducing more products but decreasing their revenue because of it. This might be because consumers are interested in high-quality products and retailers that are over-expanding their private label selection are losing their premium appeal.

In 53 tracked categories, name brands were found to dominate over private brands when it comes to consumer preferences. In 41 categories that included personal care products, pet food, soft drinks, coffee and confectionary, consumers claimed that name brands are better than store brands. When it came to products found in the perimeter of a grocery store such as dairy, produce, fresh meat, paper products and bottled water, consumers said that name brands and store brands have the same quality. So it seems that CPG product sales are primarily from national brands.

From these findings, retailers are advised to not put all their eggs in one basket. By investing in both private label and national brand growth, grocers are likely to build lasting relationships with their customers. Grocers need to develop a successful brand strategy with the right mix of national and private branded products.

“Brands are the fuel that powers shoppers to make more trips, spend more per trip and stay loyal to products and channels,” said John Clevenger, Managing Director and Senior Vice President of Strategic Advisors, at Acosta in a release. “National brands continue to dominate, with a worth of over $558 billion in 2017, compared to $124 billion for private label brands, which are marketed by the retailer under their own brand and typically positioned as lower-cost alternatives to national brands. A study of more than 100 retailers revealed that the retailers growing both national and private label brands are experiencing the best overall growth, proving that a strategic mix is key.”