Store brand fever cools a few degrees

August 09, 2011

People find mostly different ways to save - other than private label - in the face of the latest food price rises, says Deloitte.

Food price hikes in 2011 resemble the volatile 2008-2009 period, when U.S. households turned sharply to private label to save money and store brand share rose. Although the economy continues to pressure household budgets, PL dollar share growth has slowed since then and PL unit share has declined, according to figures released in the SymphonyIRI Group Times and Trends report of May 2011.

Name brands were caught off guard a couple of years ago, but have innovated, grown more sustainable or repositioned as value choices in order to differentiate and keep store brand competitors at bay. For these reasons, F3 believes PL won't surge as dramatically amid current CPG price hikes.

Store brand fever has abated slightly, according to an Ipsos Marketing survey of consumers in 21 countries, including the United States, conducted in December 2010 vs. a similar period a year earlier. In nearly every nation polled, PL ratings declined on many measures - being high quality, trustworthy, environmentally friendly, unique and innovative. Taste and packaging appeal were also down.

Still, 80% or more consumers feel PL is the same or better than national brands in providing good value for the money, meeting needs, offering convenience, being good for families and filling family requests; even these were down two percentage points or more in the latest Ipsos poll. "We see that store brands, which initially distinguished themselves as low cost alternatives...are showing signs of vulnerability," said Gill Aitchison, president, Ipsos Marketing, Global Shopper & Retail Research.  

"Certainly, the economic crisis propelled the purchasing of store brands in 2009. Consumers may have tried store brands during the recession and found them satisfactory....At the same time, national brands battled fiercely against the store brand onslaught....National brands should continue to focus on benefits where they are most differentiated from store brands - packaging, innovation and uniqueness - which in turn will help drive trust and quality perceptions," urged Aitchison.

Meanwhile, 87.7% of U.S. consumers see food store prices heading up, and 74.0% see the size of some packaged goods getting smaller, according to Deloitte's 2011 Consumer Food and Product Insight Survey Part Two, which questioned 2,000 adults in May 2011.

In response to higher prices:

  • 75% have bought more lower priced products
  • 48% have bought fewer food products overall
  • 40% have bought more private label
  • 21% have bought more smaller sized products
  • 15% have bought fewer organic products

In response to smaller packages:

  • 64% seek out lower priced brands, including store brands
  • 53% switched to other products that have the same, larger size they used to buy
  • 33% switched and now buy products in very large sizes or in bulk, which are cheaper on a per ounce basis.

Moreover, the Deloitte research reveals that 34% of smartphone users researched food prices or product information while in a store. Also, 43% of smartphone users have managed a food shopping list on their device while not in a store.