Brand-name products still threatened by private label

Posted by Lisa McTigue Pierce, Editor -- Packaging Digest

 

 

A new study from Accenture finds that the threat of store-brands—also known as private-label or generic products—to brand-name products is not going away. Two thirds (64 percent) of shoppers surveyed by Accenture admitted that their grocery carts were at least half full of store-brand products, and 39 percent said they have increased their purchase of store-brands in recent years as a result of the tough economic times.

 

The Accenture study of 500 U.S. consumers found that price remains the key factor in the majority of store-brand purchases. Two thirds (66 percent) of shoppers said they buy store-brands because they are cheaper. Also, while 87 percent of shoppers said they would buy more brand-name products if they were offered at the same price as the comparable store-brand, more than half (51 percent) said that it would take a permanent price reduction of the brand-name product—to the same price as the store-brand—to persuade them to return to purchasing the brand-name product.

 

The Accenture study concludes that the growing perception of trust, quality and preference for private-label products should be of most concern to consumer goods companies that are competing with stores for the same shelf space.

 

Half (50 percent) of consumers surveyed buy store-brand products because they perceive the quality to be just as good as the brand-name equivalent, 42 percent buy a private-label product because they "trust" that particular store's brand, and 28 percent simply prefer the store-brand product to the brand-name product. In fact, only 9 percent claimed not to buy store-brands because they felt that the quality or taste was inferior to the brand-name product.

 

"Consumer goods companies must respond to the threat of increasing competition from store-brands as market position and profitability are at stake," says Bob Berkey, from Accenture's Consumer Goods & Services practice. "Extreme competition between retailers and consumer goods companies can result in inefficiencies and waste for manufacturers and retailers, and undifferentiated products for the consumer. Consumer goods companies must develop a balanced strategy of collaboration with retailers in some areas and competition in others. This new dynamic—where competitors become partners—will require a considered focus from manufacturers."

 

The study found that consumers believe that stores have improved the variety and appeal of their range of store brands. Almost half (48 percent) of shoppers believe that stores now offer a greater number and variety of store-brand products, and more than one third (36 percent) see store-brand products as simply another brand on the shelf.

 

As further evidence that better selection, trust and preference are driving sales of store-brands alongside price, 77 percent of shoppers said they would not decrease the amount of store-brand products they buy even if their disposable income were to return to the same level as it was before the economic downturn.

 

"Undoubtedly, uncertain economic times are a major factor in the growth of private label, but it is the increased sophistication of stores' own brands that has helped them retain customers," Berkey says. "Consumer goods companies must create a clearly defined private-label strategy that understands the unique attributes that drive preference and loyalty in their consumer, engages with them across multiple channels and creates an excellent customer experience."

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