CHICAGO -- Coming just days after Delek US announced plans to increase its emphasis on private-label products, a new report said acceptance of such products is on the rise. Nearly 75% of all U.S. consumers rate private-label offerings as excellent in overall quality, with older and lower-income shoppers leading the way, according to a new study from Information Resources Inc. (IRI).
The report by the provider of consumer, shopper and market insights for the consumer packaged goods (CPG) retail and healthcare industries also reveals that despite generally flat sales during the past few [image-nocss] years, store brands are gaining favorability in key CPG categories, offering the potential of sizeable market share gains among lower-income shoppers.
The study, The 2008 Private Label Report: Understanding Emerging Trends & Key Success Factors in Private Label, provides information for retailers and manufacturers through additional research components including the use of a new AttitudeLink panel survey that breaks down attitudinal differences among respondents across age groups and income levels.
"There is a growing revolution of value and consumer selectivity happening at our neighborhood grocery stores," said president of IRI consulting and innovation Thom Blischok. "Once the low-cost, lesser-quality substitutes for name brand CPG items, private labels are quickly turning into innovative, top-quality and good-value additions to family grocery lists. It's an emerging fact of life for retailers: the quality gap is closing and new consumer attitudes are changing the center store landscape."
According to the IRI study, price alone is no longer the make-or-break proposition for customer selection of private label items that it once was. Quality, variety, packaging and the store's reputation itself are now important contributing factors that determine the selection of a private-label product.
"Price alone does not seal the deal," said Blischok. "And, it is in this environment of refined consumer values and perceptions that retailers have the opportunity to expand household penetration and increase product usage."
IRI findings show that several categories of CPG private-label products are ripe for market share gains. Commodity-driven categories that are not dominated by a national brand and possess little need for innovation are showing increased favorability. These include staples, such as butter, pasta, milk and creamers and paperware products. Joining these are a variety of new private-label entries demonstrating the consumer's willingness to choose items that maintain or exceed quality expectations, regardless of the label. Among these developing growth categories are refrigerated entrees, skin care products, baby formula, tissue items and laundry detergent.
With price still a dominating factor, IRI information shows the target audience for private-label CPG products remains lower-income shoppers. Compared with other consumers, lower-income shoppers rely considerably more on private-label items across all 295 analyzed food, beverage and nonfood categories. In 2007, lower-income shoppers spent 17% of their overall CPG dollars on private-label products, as compared to 15.7% and 13.7% for middle income and higher income, respectively. Yet, IRI analysis shows that despite the larger stake that lower-income shoppers have in store brand items, retailers are missing opportunities to tap into the growth potential of this market.
"There's a huge opportunity for retailers who understand the power of private-label offerings," added Blischok. "Our micro-segmenting and cross-purchase pattern analysis of lower-income shoppers shows plenty of room for product expansion and a greater chance to gain market share across many key categories. By responding to consumer needs, especially young families who are looking for both quality and value, smart retailers can develop a whole new segment of brand loyal consumers who look for the private label first."
Click hereto view the Delek US private-label story.
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