Digital CPG Blog

Well, if you’re ever dismayed by a piece of research, just wait a bit and a new study will come out and make you happy again. While last week, we reported that researchers had found decreased loyalty among CPG categories, this week researchers are finding the opposite:

Despite the economy and the growth of private label, brand loyalty has increased in 45 of the top 100 CPG categories over the past three years, according to a new report from SymphonyIRI Group.

Some — like sports drinks — have seen significant gains. Between 2008 and 2010, the percentage of consumers who reported being loyal to a sports drink brand rose by 6.5 percentage points, to 87.6%.

The definition of brand loyalty: More than 50% of the buyer’s total purchasing in the category is of a single brand (not including private label).

Batteries gained 3.9 percentage points to reach a 73.5% loyalty level (as of July 3); cleaning tools/mops/brooms gained 2.8 to reach 72.4%; shelf-stable dinners gained 3.7 to reach 66.9%; shampoo gained 2.8 to reach 65.9%; cat and dog litter gained 2.5 to reach 62.2%; dry packaged dinners gained 3.2 to reach 59.3%; diapers gained 4.4 to reach 58.3%; and household cleaners gained 3.5 to reach 50.9%.

Categories showing the largest losses in brand loyalty include refrigerated salads/coleslaw (-22 points); gastrointestinal tablets (-11); cold/allergy/sinus tablets (-7.2); internal analgesics (-6.9); sugar (-6.5); pastry/doughnuts (-5.2); creams/creamers (-5.2); Mexican foods (-5.1); RTD tea/coffee (-4.9) and butter (-4.7).

Never fun to read the bad news, but let’s get it out of the way this week so we can concentrate on more fun stuff later this week–

As shoppers’ economic concerns eased somewhat in the wake of the recession, some industry observers predicted that store brands would give up their recent gains, or even decline as the economy rebounded. The expectation proved without foundation, however, and the return to some kind of pre-recession status quo eluded the national brands. To the contrary, store brands held onto the gains and even built on them.

Sales of store brands saw gains of more than +2% in U.S. supermarkets and nearly +5% in drug chains. Over the past decade, annual sales of private label products have increased by +40% in supermarkets and by +96% in drug stores.

It was highly unusual, if not unprecedented, that in supermarkets national brands were negative (minus 0.1%) in year-to-year dollar sales, while their unit sales were up a by modest 1%.

It’s not surprising that store brands held their ground after recording sales surges the past few years. Recessions often force consumers to test new purchasing habits. What occurs, in effect, is a large scale sampling experience. Good results with store brands during these periods invariably breed consumer familiarity and then loyalty to the products and the stores that sell them. While some consumers do return to brands they had been buying before, a large percentage stay with their new private label choices.

via Consumer Goods.

Private-label sales in supermarkets, drugstores and mass merchandisers rose nearly 2% in 2010 to reach a record $88.5 billion, according to the Private Label Manufacturers Association.

Private label sales grew two percent in supermarkets, a gain of $1.2 billion, and five percent in drug in the past year, which is an increase of $300 million, according to the report.

Store brands’ share of dollar sales in supermarkets reached 19.1 percent, with unit sales accounting for 23.5 percent. In drug stores, store brands reached a dollar share of 14.7 percent and unit share of 16.2 percent, the report reveals. In all outlets, private label accounts for 17.4 percent of dollar share and 21.8 percent of unit share.

Unit sales of private label, however, dropped 0.9 percent in all outlets, PLMA says.

Across channels, national brands lost $4.6 billion in sales revenue, according to the report, while unit sales of brands fell 0.6 percent.

What are you doing to keep your brand share in the market?

“Betting that parents are less stingy when it comes to junior’s needs, two of the country’s biggest makers of diapers and wipes are pushing through price increases. Kimberly-Clark Corp. plans to raise prices on its Huggies diapers and wipes by 3% to 7% while Procter & Gamble Co. announced a 7% rise in prices for its Pampers diapers and 3% increase on wipes,” reports the Wall Street Journal.

Why such confidence? That’s because:

“Shoppers are less likely to switch to a cheaper brand on a baby product than many other items on the shopping list,” according to a recent survey by Sanford Bernstein analyst Ali Dibadj.

“Just 10% of consumers said they switched to a cheaper diaper brand because “it’s not worth paying more in this category,” and no consumers reported switching baby food. By comparison, nearly a third of consumers said they switched brands of bleach, bottled water and liquid soap.”

Who else can raise their prices?

“Brands that have the highest market share, are purchased infrequently (like sunscreen or lightbulbs), are necessities, have few competitors, or where it would be hard to reduce consumption (like toilet paper) have the most power to enforce price increases.”

“Mr. Dibadj ranks Kimberly-Clark and Clorox among the least able to raise prices, given that they operate in highly competitive categories with high commodity cost pressures. P&G and Colgate, with their exposure to distinctive items like beauty products, pet food and toothpaste, fare better, Mr. Dibadj said.”

A study from the Private Label Manufacturers Association says consumers can shave 33% from their grocery bills if they buy only private-label products. Private-label aspirin was as much as 60% less expensive than national brands, the study found, while pasta sauce represented a 40% savings and store-brand carbonated drinks could save consumers as much as 46%.

So, what are you doing to differentiate your product beyond price? You can only go so low… how will you inspire loyalty and fan-dom? Going direct to consumer is an obvious way to combat this issue. Are there others?

It seems we report on private label’s increased market share almost every other week. But today is not entirely dreary for national CPG brands – we’ve got both good and bad news.

First, the bad news: “The global market share of private label food products is expected to double, from its current 25% to 50%, by 2025,” according to a new report from the Food and Agri Research division of Rabobank, an international financial services provider.

But the good news: “The report, however, also concludes that top or “A” brands are expected to retain their market shares. It’s the smaller, often local, “B” brands that will face mounting downward pressure on volumes, as retailers stop carrying them in favor of using their shelf space for their own private label brands.”

So even though the innovative and scrappy local brands are getting knocked off, national brands finally get a break.

“In the just completed shopper research on private label usage conducted by Perception Research Services (PRS), fewer shoppers reported purchasing private label products on a regular basis, compared to the last wave of research conducted in July 2010 (84 percent vs. 94 percent), but those buying private label goods are buying more of it (average number purchased up 25 percent from 4.8 to 6),” reports Consumer Goods Technology.

Paper products continues to be the leading private label category purchased, with increases evidenced across almost all categories, and the largest seen for cereal (+20 percent), cleaning products (+19 percent)

“The data suggests that while the penetration of private label usage may have peaked, a significant portion of ‘triers’ have been converted to ‘believers’ who now choose the private label alternative for more types of products.”

Indeed, national brands will have to do a lot to now tempt those customers back. And might I suggest that any changes or strategies implemented for such an outcome have nothing to do with package design or messaging? To pay more, consumers are going to need an experience, not just a product. Generic brands don’t give this at all, and right now, national brands don’t either. But this is one area where the national brand is poised to be able to make a bigger impact because of all the history and meaningfulness surrounding their products.

Think of your product and your marketing campaigns as a complete experience for the customer and you may just be able to beat private label in the ring.

It used to be understood that private label brands were of lesser quality. Nowadays, not only is that changing in reality, but in perception as well.

“The private label market has enjoyed sales growth in recent years that isn’t likely to decrease in the near future, as private label companies continue to introduce better-for-you products and more attractive packaging, all while being easier on consumers’ pockets,” reports CS News.

The reputation of private label products has improved, with 44% in a Mintel survey saying quality has gotten better over the past five years and 34% saying they are not giving up anything by using store brands. “Many retailers have introduced premium private label products in recent years that rival their branded counterparts in flavor and nutritional value,” said a Mintel analyst.

How can national brands continue to compete? And is it a private label anymore if they are doing all the same things as a national brand?

Private label continues to up the ante in today’s market. While private-label packaging typically contains stock features to minimize costs, Safeway has introduced “a custom carton shape that works together with mouth-watering photography to create product differentiation on shelf.”

Personally, I tend to like the simpler packaging of private label unless a product shape has ergonomic benefits.

“Popular thinking has been that national brands therefore could gain a marketing leg up on private-label products by investing in custom package shapes. But Safeway’s new ice cream container is one sign that the playing field might be on the verge of leveling out, because the retailer found a way to achieve a custom shape while also delivering production efficiencies and cost savings.”

Safeway’s move signals a class of private label that looks like, tastes like and is like national brands. Will these advancements level the playing field?

Deloitte has just released a comprehensive study on private label. Among the key findings:

- Mounting evidence suggests that national brands are losing their hold on the consumer. As a result, consumers are more willing to try new and different brands and believe they have more convenient access to a wider array of product choices.

- In an increasingly transparent world, the most important and discerning consumers—the ones with strong opinions on which salty snacks taste best and which household cleaners are most effective—are twice as likely to have a favorable impression of store brand quality.

- Consumer product and retail managers, when surveyed, believe that 71 percent of consumers will switch stores if their preferred brand is no longer available at a retailer, and 62 percent of consumers make special trips to retailers just to purchase their favorite store brand.

- In the battle for the customer, store brands are winning. Unless manufacturers can create a clear reason in the consumer’s mind that the brand is more important than the store when making their choices, the manufacturers are bound to lose margin to the store. Discounts do not do this. Coherent branding strategies do.

To effectively battle private label, Deloitte suggests that national brands should:

1) Develop clearly differentiated national brands, create unique products, and renounce reckless promotions.

2) Develop a product portfolio that reflects each retailer’s consumer base, that includes localized products and reflects quickly cadenced improvements to packaging and product performance.

3) Revisit and accelerate the pace of their direct-to-consumer efforts.

Read the full and fascinating study here.