Which Retailers Will Optimize Private Label?

Consumers perceive the health of the economy by their own direct experiences. If they are struggling to make ends meet, if they or family members are unemployed, or face other tough circumstances, they’ll be digging in their heels when they shop for food in 2010 – regardless of what government statistics might suggest

Consumers perceive the health of the economy by their own direct experiences. If they are struggling to make ends meet, if they or family members are unemployed, or face other tough circumstances, they’ll be digging in their heels when they shop for food in 2010 – regardless of what government statistics might suggest.

For example, half of shoppers intend to spend less money on groceries in the months ahead, reports the Private Label Manufacturers Association in its latest study, Recession, Recovery and Store Brands, conducted in February 2010 by GfK Custom Research. Savings strategies will prevail, said nearly 800 chief household grocery shoppers surveyed: more than 2 out of 3 will buy larger sizes, 2 out of 3 will seek more coupons and national brand promotions, and 1 out of 3 plan to switch stores for their primary grocery shopping. In addition:

• More than 60% plan to buy more private label to stretch their food dollars
• 57% say they buy private label items frequently (up from less than 55% a year ago)
• 43% switched to store brands in categories where they only bought national brands previously (39% in June 2009)
• Fewer than 20% feel the economy has improved in the past year

Retailers are looking to cash in on this greater popularity of private label like never before. Not only have they leveraged PL to extract more favorable terms from national brands suppliers, but two of the nation’s largest grocers – Supervalu and Safeway – have just decided to manage their PL programs more directly without the help of Daymon Worldwide.

It will become apparent soon enough if other chains decide to follow this path – if retailers feel they’ve learned enough watching Daymon and others through the years to manage their portfolios in-house. Our take at The Lempert Report: shopper insights and other proprietary data could make the right decisions possible, if a retailer has the right talent on board (perhaps former CPG executives) and the right internal alignments to properly orchestrate the PL assortments, pricing/promotions, placement and new products. This will be a critical assessment for retailers, since today’s opportunity to hit – or miss – with increasingly sensitive shoppers has probably never been greater where PL potential is concerned.