Private Label Growth Slows

Private-label products in 2011 have not surrendered the sales gains achieved during the first years of the recession. They are not exhibiting signs of advancement, either, according to trackers and analysts of store brands.During the 52 weeks ending Aug. 7, private-label products accounted for 13.6% of dollar sales and 16.8% of unit sales in grocery, drug, mass and convenience stores, according to SymphonyIRI, the Chicago-based tracker of retail sales data. Those numbers represent a mere 0.1 point dollar share increase and a 0.3 point unit share decrease versus the same period a year ago. SymphonyIRI trend analyst Susan Viamari says "this is a shift from trends seen earlier in the economic downturn and recession," when cash-strapped bargain hunters ventured into new categories of store brands and made them the star performers of retail.Over the three-year period from 2008 to 2010, private-label sales in all retail outlets reported by New York-based Nielsen Co. increased by 5%, from $84 billion to $88.5 billion. (Nielsen does not track warehouse clubs, limited assortment groceries, or convenience and dollar stores, whose contributions would lift the total over $100 billion.) Last year, store brands accounted for 100% of revenue growth at supermarkets, ringing up a $1.2 billion increase while national brand sales were declining to the tune of $149 million, according to data compiled by Nielsen for the Private Label Manufacturers Association.But so far in 2011, retailers appear content to watch the seeds of high-profit store brands sown during the recession grow. U.S. stores introduced nearly 10,000 new private-label products in 2010 but only 5,000 this year through mid-August, according to the Mintel Global New Products Database (see chart). That puts retailers on a pace for the introduction of 8,118 new products by year's end, a decline of 18%. The pace of private-label intros has fallen off by a third or more at Aldi, Bath & Body Works, Target and Supervalu.Drug chains are picking up some of that slack as they work toward the 19% private-label dollar share enjoyed by supermarkets. In a letter to shareholders in CVS/pharmacy's 2010 annual report, outgoing chief executive officer Thomas Ryan and his successor, Larry Merlo, promised 900 additions to a store-brand stable that produced $3 billion in sales last year. "Store brands now account for 17% of our front-end total, and we believe that penetration can reach more than 20% in the next two to three years," they wrote.In a May 11 investor letter, Rite Aid reported the revamping of more than 1,000 private-label items and added that the chain aimed to have 2,900 SKUs under the new program by early next year in an effort to improve on a current front-end unit share of 16%.The bold stroke of the year was executed in July by Walgreens. The nation's largest drug chain scuttled current offerings such as Café W and Deerfield Farms and replaced them with Nice!, a store brand encompassing some 400 grocery products destined for 7,742 Walgreens and Duane Reade drugstores by year's end.Shopper habits may well favor drug chains in their efforts to ramp up private-label sales. A study of more than 1,000 U.S. households conducted in February by Ft. Worth-based Buxton Research discovered that while nearly 70% of shoppers arrive in supermarkets carrying detailed lists, the same 70% rarely entered drugstores with written reminders. "People are much more open to private-label offerings in a store when they haven't gone in with a list of specific items or brands," says Buxton vice president Bill Bradshaw, who delivered the study results at this year's PLMA Leadership Conference.CVS, for one, has gotten aggressive promoting its own brands in-store in 2011, devoting both end-aisle and in-shelf displays in its "Price Cuts" signage program to CVS brand OTC and first-aid products as well as Just the Basics items such as ready-to-eat cereal.Among other notable private-label developments in 2011:Walgreens and 7-Eleven challenged the highly competitive premium beer market with significant introductions. Game Day is now available at the nation's largest convenience store chain in Light and Ice varieties in 24-ounce single cans priced between $1.49 and $1.89, and 12-packs of 12-oz. cans for $6.99 to $8.99. Walgreens, meanwhile, introduced Big Flats 1901 in six-packs priced at around $2.99. Private-label beer accounts for less than a tenth of a percent of total sales, according to Nielsen, but the two channel-leading retailers are counting on consumer receptivity of private labels and their own control of thousands of cold cases to make inroads.Best Buy added the TiVo-powered Connected TV to its exclusive Insignia line, the first television on the market to offer TiVo without a subscription fee. The 32- and 42-inch screen versions retail for $499 and $699 and are preloaded with applications from Netflix, YouTube, Pandora, Napster and Facebook.Fresh & Easy, the Tesco-owned supermarket chain operative in California, Arizona and Nevada, expanded private-label offerings into the green and gourmet segments. Green Things – bearing a striking resemblance to Clorox's Green Works brand – is a line of paper goods made from 100% recycled materials and cleaners derived from plant-based formulas. The Gourmet brand line of fresh and frozen "restaurant quality" offerings includes soups (crab, and sweet potato bisque at $3.99), entrees (braised lamb shank, $6.99) and desserts (dark chocolate raspberry gelato truffles, $5.99).Ahead on the private-label horizon: store-specific offerings. "Projects are in motion at several chains to tailor private-label offerings to specific stores and zip codes," says Bradshaw. "They've developed all the me-toos they can and are taking it to the next level."

Private Label Growth Slows

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