A new report by global market analysis expert Datamonitor, US Private Label 2000: Standing Out in the Crowd, closely examines the changes that have occurred in the US private label food and drink markets to demonstrate the fact that private label is becoming increasingly like a national brand.
Datamonitor’s research finds that:
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1. The US private label food and drinks market is currently valued at $48.6bn, which will grow to $67bn by 2004;
2. Private label growth has been driven by retailer consolidation;
3. A&P leads the way in making private label a “national” brand.
The US private label food and drinks market will grow to $67bn by 2004.
Private label sales have been growing in recent years in the food and beverage categories. Currently, private label food and beverage sales account for 15.4% of total dollar sales. With total supermarket food sales at $315bn in 1999, private label sales have reached $48.6bn.
According to Datamonitor consumer markets analyst Sari Post: “The most spectacular private label growth has been in the chilled/deli category because of retailers’ increased investment in their perishable departments. With store branding being an important retailer strategy for 2000, retailers are using their perishable departments as avenues to build store brand loyalty.”
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By GlobalDataWithin chilled/deli, the ready meals category has achieved tremendous growth. Home meal replacements have increased in popularity since people have increasingly less time to prepare food. Ms. Post comments: “Because there is a lack of brand loyalty in this category, it is an area where high quality private label products can distinguish themselves. “
Continued growth in chilled/deli, as well has healthy growth in the frozen food and dairy categories, will drive private label sales to approximately $67bn in 2004, which will represent approximately 18% of total dollar sales.
Private label growth has been driven by retailer consolidation
In the past five years, food retail chains have expanded their private label programs. On average, private label penetration in the top twelve food retailers has increased from 19% in 1993 to 23% in 1999. Much of this growth is explained by retailer consolidation. Currently, the top five food retailers control 33% of total food and drink market sales, up from 24% in 1998.
The relationship between consolidation and private label is explained by differentiation. As a result of consolidation, each large retail chain is competing with other large retail chains that offer the same diverse assortment of national brand products. In this highly competitive situation, retailers believe that having a strong private label program is the best way to differentiate from the competition.
Private label is also an excellent weapon against large national brands and a significant profit generator. On average, private label profit margins are 27% higher than national brand margins. A number of private label products have gained national recognition as a result of consolidation. Many retailers are advertising their store brand products in newspapers and on television, and they are also entering categories that are traditionally dominated by national brands. These characteristics resemble those of national brands, and that increasingly the differences between private label and national brands are being eroded.
A&P leads the way in making private label a “national” brand
A&P’s Master Choice, America’s Choice and Savings Plus brands are sold in all of the company’s acquired supermarkets, including Super Fresh, Farmer Jack, Waldbaum’s, and Food Emporium. Previously, these brands were limited to the Northeast, where A&P supermarkets are located. Now, A&P’s private label products can be purchased in Canada, Michigan, Wisconsin, and New Orleans as well. Ms. Post comments: “This example of giving private label brands wider distribution makes them seem like national brands because the retailer has an opportunity to build a loyal customer base throughout the US and beyond. In order for private labels to compete with national brands, the retailer must follow a branded innovation with a store brand copycat as soon as possible. For this reason, retailers will be looking for manufacturers who are able to copy the national brands quickly and accurately.”
*’Private Label 2000: Standing out in the Crowd’, $4995. Datamonitor sales NY 212 686 7400
Datamonitor are market analysis experts, founded in 1989. See www.datamonitor.com.
