04.15.2009

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Stepping Out of Name Brands’ Shadow

Private label certainly is the talk about town these days. Really, though, one has to wonder what the media buzz is all about. Private label, after all, is no new kid on the block. Retailer’s own brands (aka. private label, store brands), have been hanging around national name brands for years. The question was never a matter of if as much as when private label would evolve to seriously threaten national brands as brands unto themselves.

Consumers, arguably, have shown a decided preference for name brands. A select number of these brands have come to symbolize American culture itself. Iconic brands such as Coca-Cola, Disney, Levi’s, Nike, Volkswagen, Budweiser, Heinz and Harley Davidson are used as much for what they represent (i.e., a means of self expression, shared values, etc.) as for their functionality.

And yet…

When consumers take into consideration essential elements of purchase decision-making (quality, value, price, taste, appearance, etc.) we find that the gap between private label and name brands has definitely closed. As Figure 1 illustrates, only 5% of consumers believe private label products are “inferior” to name brands. When asked how private label compares to name brands, one-third (33%) of consumers see absolutely no difference while half (49%) of consumers believe that private label is close to name brands.

The Private Label Story Continues

At the same time as the quality curve has gotten sharper, there is also a strong legacy of value orientation that comes with private label. Whether consumers find private label to be “just as good” or perhaps even “better,” it is still largely expected to be “for less” than many other branded alternatives. In today’s economy, the value equation is a critical question as consumers seek to live well with sometimes shrinking budgets.

At this moment in time, what it means to be a “brand” is being redefined. While traditional name brands have long been regarded as trendsetters, their stranglehold on consumer consciousness and retailer shelf space is changing—in a big way.

Compared to Europe and Canada, the U.S. private label marketplace is not as mature. Private label dollar share is considerably lower in the U.S. than in Europe and Canada where private label dollar share is approximately 30 percent (depending on market and/or retailer). In the U.S. a select group of retailers (Kroger and Wegmans for example) are using private label to achieve higher than average private label category penetration rates. These retailers are exploiting key private label categories as tools of differentiation and as devices to build customer loyalty.

But have store brands come far enough in the minds of consumers for them to shoulder the mantle of differentiation? What does it mean to be a “brand” in today’s current economic reality? We believe the private label success stories are yet to be written.

As consumers continue to move beyond traditional notions of branded products in search of unique selections, better quality ingredients and yet products that still deliver on "value,” we will be right there with them. The results of our syndicated research, Private Label 2010: Redefining the Meaning of Brand, will reveal where consumers are heading with regard to private label purchases and where they will likely end up on the other side of the recession. Stay tuned to see how this story unfolds.

Get the story as it unfolds, become a Private Label 2010 sponsor. Download Private Label 2010 syndicated study fact sheet >>

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Private Label from a Consumer Perspective

The Pulse Report, Private Label from a Consumer Perspective, examines store brand familiarity, awareness, associations between channels and store brands, store brand quality, the price/value factor and occasions for purchasing store brands.