Influx

The threat to brands from private label doesn’t seem to be going away anytime soon. In fact, conditions have never been better, with the development of higher value categories like organics and meal solutions. Daymon Associates, a consulting company that helps grocery retailers develop and market private label solutions, worked with AC Nielsen to create a detailed study on the current state of private label

The study’s key findings are as follows:

-Private label is no longer limited to the historic buyer profile of low- to middle-income families. In addition, there’s higher private label buyer development in households with $70,000 or greater annual income.

85% of top-spend private label buyers say that it’s a good alternative to brands.

59% of consumers say that it’s “just as good” as national brands.

33% of consumers say that some private label items have “higher quality” than brands.

90 % of consumers feel comfortable serving private label to their guests.

72% of consumers don’t believe that national brands are worth the extra cost.

The research clearly shows that private label is in a very strong position to challenge brands; its only weakness lies in marketing. Traditionally, US grocery retailers have not been as sophisticated as their UK counterparts at building their own brands and private label lines.

One example from the UK, is the No2 grocery retailer Sainsbury, who has invested heavily in building its brand through advertising and in the past 6 years have used chef Jamie Oliver as a spokesman. In 2002, Sainsbury won an effectiveness award for their advertising, based on the performance of a campaign that generated $1.8 billion of revenue on a media expenditure of $40 million.

If grocery retailers can grasp the power of their brand and create memorable advertising, their private label brands can grow even more.

Incidentally, Safeway’s $250 million ad account is up for review.