IRI just released its latest Times & Trends report on Private Label & National Brands and the results are enlightening for CPG manufacturers and retailers alike. Even with the recovering economy, four in ten people remain financially challenged and are still seeking value, including affordability, when they shop for products. However, what people consider affordable can vary considerably by channel, category, brand and even need state. Deciphering the changing definitions of affordable in different situations can be confusing for private labels and national brands trying to compete in this increasingly fragmented and diverse marketplace.
While the report shows that one-third of consumers specifically seek out private label products to save money, national brands have been seeing some unit share momentum in some channels and categories. For example, national brands captured 0.2 dollar share points in the drug channel during the past year. In grocery, national brands are protecting or growing share across a majority of departments, and in the dollar channel they have actually taken some share away from private label. Health and beauty continue to be strong for national brands, likely because of their focus on innovation in these areas.
In response to the intense competition in packaged goods, some retailers have been looking at “opening price point” (OPP) private label solutions – essentially no-frills products that would appeal to the most cost-conscious consumers. But private label suppliers are concerned that this approach may negatively impact the perception of quality of their private label products – something they have worked hard to achieve.
One quarter of people said they are buying brands that are on sale over their preferred brands, and 23 percent are choosing products based on loyalty card discounts. They are also doing a lot of pre-planning, limiting purchases and making other adjustments to stay on budget. More than two-thirds (70 percent) of consumers said that store brands are a good option when their preferred brand isn’t on sale and they don’t have a coupon.
While IRI’s Shopper Sentiment Index for Q3 2014 shows increasing optimism, it’s clear that customers are still closely watching their purse strings. This means that, in order to grow, manufacturers and retailers need to develop programs that focus on value and affordability. This can take a variety of forms, from price reductions and buy-one-get-one to assortment stratification and co-marketing. At the same time, manufacturers and retailers need to understand their brands’ and products’ complete competitive frame—the products they are truly competing against, rather than the products they think they are competing against.
For manufacturers and retailers to win, every effort must begin with a very clear understanding of channel- and retailer-specific strategies and be developed collaboratively with partners to ensure overall category success. It may be a delicate balance, but it can be achieved without sacrificing brand image and margin goals.
Want to know more? Join us for a complimentary webinar, Private Label & National Brands: Dialing in on Core Shoppers.