A squeeze on brand loyalty

Private-label advances and a new search-engine study point to new urgencies for CPG brands.

A dual squeeze on CPG brands raises pressure to innovate and differentiate more—or risk losing equity at the shelf and on e-tailer websites, and consequently weakening their financial performance.

Consumers today express more loyalty to retail stores and product types than they do to brands, according to new ShopAtHome.com research based on search terms used. And they continue to embrace private label at a significant rate that could double by 2025, notes Rabobank’s Food & Agribusiness Research and Advisory Group.

In short, brands’ loyalty is on the line. Against the backdrop of shopper savings behaviors that have persisted since the recession, and the budgetary struggles of 80% of the U.S. population (Nielsen’s Todd Hale), retailers need compelling reasons to stick with their heavy mix of name brands. The performance of Trader Joe’s, Aldi, Costco (Kirkland) and Kroger show that house brands can certainly succeed.

In a new Accenture shopper survey, 39% of respondents say they’ve bought more store brands in recent years because of the tough economy. Also, 64% say their grocery carts are at least half full of store brand products.

This appears to extend a trend revealed in the Private Label Manufacturer Association’s 2011 Private Label Yearbook, which is based on Nielsen data for the food and drug channels. In supermarkets, store brands rose to a 19.1% dollar share and 23.5% unit share. Across both channels, PL posted a 17.4% dollar share and a 21.8% unit share.

More dramatically, Rabobank predicts PL is “set to double market share to half of all goods sold in supermarkets by 2025 [mostly at the expense of]…second-tier brands that lack real traction with consumers.”

Meanwhile, the ShopAtHome.com search engine study notes that 62% of consumers search for store-centric deals, 24% for product-specific coupons, and just 14% for brand-name product discounts online. Consumers are most likely to seek deals on items they buy consistently, such as toilet paper, detergent, coffee and butter. Toilet paper was the term searched most over the past two months, the site said.