Brandweek is calling 2009 as the Year of Private Label. And why not?
As consumers continue to cut back, branded manufacturers often do the same with marketing dollars.
But this time, consumers have options. Alternatives come in attractive packages that might say "Archer Farms", "Kirkland", "Sam's Choice", or "O Organics".
The ResultsAccording to a report by Nielson Co, unit sales of baby foods grew 22.3 percent for the 52 weeks ending October 3rd.
Frozen pizza and snacks were another category where branded manufacturers took a serious hit, as private label made a 20.4% gain. This was followed by salad dressings, mayo, and toppings at 18%.
Overall, unit sales of private label goods rose 5.3 percent for the same period.
Categories where private label made the biggest gains (percent gain over last year):
1. Baby Food: 22.3% 2. Frozen Pizza/Snacks: 20.4% 3. Salad Dressings: 18.0% 4. Candles: 16.8% 5. Snacks: 15.9% 6. Canned Seafood: 15.3% 7. Detergents: 14.2% 8. Fresh Produce: 14.2% 9. Cheese; 14.1% 10. Meat: 13%Private label alternatives see this as the
perfect storm. They truly believe that through attractive packaging and product quality, they can turn the recessionary consumer into a long-term brand ambassador.
Spill-over Trends in Foodservice?With the foodservice industry witnessing severe cuts in consumer spending, it makes sense that foodservice operators will do all they can to cut costs without sacrificing quality.
In retail, brands fend off private label by emphasizing familiarity and longtime appeal. The success rate is much higher in categories driven by image-based marketing.
In foodservice, there is very little image-based marketing besides your typical tabletop products that consumers expect (Heinz, Equal, etc.).
Couple this with the foodservice distributor's marching orders to emphasize internal brands, and it's clear that foodservice will witness similar patterns.
I believe that changes will happen for three core reasons.
1. Foodservice operators are looking to reduce costs while maintaining quality.
2. Distributors are looking to expand market share of private label brands, as profit margins are much higher.
3. Manufacturers often react to recessionary markets with a contraction or elimination of marketing dollars.What are your thoughts?Is this a one-time surge in consumer spending patterns due to tough economic times, or will private label manufacturers continue to make significant inroads into branded manufacturer market share?
Will we see similar trends in foodservice with big distributors like SYSCO, US Foodservice, Gordon, Reinhart, and Shamrock Foods?