Moving On Up

Despite a slowdown in store brand growth overall, 70 categories (51 food and 19 non-food) posted 10 percent or higher 52-week dollar and unit sales increases to earn a spot on our inaugural Movers and Shakers list.

The wild and crazy ride for store brands might be over, at least until the next recession, but a number of product categories apparently didn't get the memo. These store brand climbers still managed to meet the criteria for our first-ever "Movers and Shakers" list (see the tables), posting gains of at least 10 percent in both unit and dollar sales — and racking up $10 million or more in sales — during the 52 weeks ending June 12 (food, drug and mass merchandiser stores, including Walmart, based on data from The Nielsen Co., New York).*

*The categories presented within the list are classified by Nielsen as subcategories of larger total store brand categories.

Other store brand categories still are growing, of course, but at a slower pace than these fast-movers. According to Todd Hale, senior vice president, consumer and shopper insights for The Nielsen Co., private label dollar share grew from 16.1 percent in 2008 to reach 16.9 percent in 2009. And through June 12, 2010, it grew to 17.2 percent. As for unit share, that rose from 20.2 percent in 2008 to reach 21.5 percent in 2009 — and 21.9 by June 12, 2010.

New territory

Some of the climbers on this year’s Movers and Shakers list represent potentially newer areas of retailer focus.

“Historically, private brands have been overdeveloped in what we would call commodity-based categories, or categories in which there’s been little differentiation from a consumer point of view, whether it is food or non-food,” Hale says. “But I think we’re seeing that retailers are recognizing there are opportunities for them to venture into new space. So in the health and beauty and general merchandise categories, the growth that you’ve seen in terms of dollar and unit sales is just very indicative of the fact that there’s a consumer need or demand.”

Indeed, a number of store brand health and beauty categories made this year's list, including women's fragrance gift sets (+154.2 percent in dollar sales and +219.8 percent in unit sales), suntan preparations (+46.5 percent and +43.4 percent), children's chewable vitamins (+33.6 percent and +23.2 percent), "remaining" cosmetics (+33.0 percent and +25.2 percent), "remaining" pain remedies (+20.2 percent and +16.0 percent), "remaining" personal soap/cleaners (+19 percent and +19.9 percent), face creams and lotions (+17.4 percent and +15.2 percent), nasal products (+15.5 percent and +12.4 percent) and cosmetics — nail care (+15.3 percent and +10.8 percent).

Hale notes that many retailers also are putting "some good marketing muscle" behind their investments in new categories — and he expects that activity to continue.

"I think every retailer can probably look at themselves and look at where they have private brands and where they may be overdeveloped or underdeveloped relative to the market averages," he says, "to look for opportunities to tweak their assortment to make sure they are getting the most bang for their buck in their private brand investment."

On the food side, many of the Movers and Shakers seem to fall into that "underdeveloped" territory — and as such, have quite a bit more room to grow. Consider the top 10 categories on this list: frozen dessert cakes (+64.2 percent in dollar sales and +230.4 percent in unit sales), frozen desserts (+55.7 percent and +138.3 percent), prunes (+52.6 percent and +47.3 percent), deli fruit/fruit salad (+45.2 percent and +45.7 percent), "remaining" non-carbonated soft drinks (+38.9 percent and +45.3 percent), frozen seafood entrées (+35.9 percent and +22.1 percent), strained baby food (+35.9 percent and +32.3 percent), refrigerated spreads (+33.2 percent and +34.6 percent), "remaining" salad dressing/ toppings (+30.9 percent and +29.8 percent) and shelf-stable dips (+30.1 percent and +22.2 percent). With the exception of the prunes and deli fruit/fruit salad categories, all of these top performers still have a less-than 13 percent dollar share of their respective total categories.

"I think we're going to see a continued growth in the food and beverage space in the basic necessities of food," Hale adds, "but I think a number of retailers are going to look for opportunities outside of their sweet spot, if you will, to drive growth in categories where traditionally private brands have been underdeveloped."

A recession that scarred

A number of factors fueled growth in the Movers and Shakers categories — and in store brand categories that didn't quite make this year's list.

First, although store brand growth typically accelerates during recessions, the recent recession appears to have made a more lasting impact on consumers than any of its predecessors did. New research from New York-based Deloitte and the Harrison Group of Waterbury, Conn., "The 2010 American Pantry Study: The New Rules of the Shopping Game," suggests consumers now have a different view of private label than they did pre-recession — thanks, in part, to the recession's length and severity.

In contrast to previous recessions, during which "bruised" consumers temporarily changed their shopping habits but eventually heeled and returned to old buying behaviors, "this recession has left a scar on the consumers' psyche," says Pat Conroy, vice chairman and U.S. consumer products practice leader for Deloitte. "And scars don't heel."

In fact, more than 90 percent of the study's poll and focus group respondents said they had changed the way they shopped and would continue to shop more prudently, he says. And, as it turns out, one of their biggest motivators was — and remains to be — guilt from pre-recession excesses.

"It was extraordinary the guilt that came out of these focus groups and the remorse from consumers about how they used to shop," Conroy stresses. "They viewed it as being somewhat indiscriminate. It was oftentimes viewed, in their own words, as 'wasteful' — and they weren't necessarily paying attention to what they were buying and whether what they bought was really needed."

Store brands are helping consumers stick to their newly frugal ways. And this recession produced a much larger wave of store brand converts than in the past, Conroy says.

"You've heard the old saying: 'familiarity breeds contempt.' Well, in this instance, I think familiarity has bred acceptance," he says. "Because the recession was so severe and so prolonged, consumers had to use these products for extended periods of time."

During that time, they realized the products were of good quality, and became much more comfortable with buying them. But the motivation for continuing to buy them goes beyond discount pricing and familiarity, Conroy notes. He says consumers' new consciousness calls for separating the true value from the rest of the bunch.

"What they basically said and are saying is that 'If I see product A for one dollar and product B for 75 cents, I need to understand that for that dollar product, I'm getting something for that extra 25 cents other than a name,'" he says. "They're asking questions and are actually following up with due diligence."

Many consumers weighing in for the survey also believed they had been somewhat duped in the past by name brand product advertising or marketing, Conroy continues. They actually said they felt embarrassed that they hadn't been more discerning when it came to comparing real product features and figuring out what they actually were getting for the money.

Another factor that's expected to continue to drive store brand growth is a stepped-up commitment on the part of retailers. Store brands boast a better quality than in the past, Hale says, and are beginning to get their due in terms of packaging, marketing and merchandising.

Differentiated store brand products are part of that commitment, Hale adds, pointing to such new items as 7-Eleven's Game Day beer, Kroger's Mirra beauty line and more.

"Retailers are getting smarter and thinking about how to market a brand, whether it carries the chain's name, the banner's name or some other unique name," he says. "So you're going to see a lot more real marketing around these things, as it makes sense."

Tough environment

Despite the phenomenal growth these 70 Movers and Shakers — and the seemingly warm and fuzzy environment for additional store brand growth — retailers have hit a few snags in recent months. As Hale sees it, a number of factors are adversely impacting sales at both the total category and store brand levels.

"Number one, commodity prices have dropped considerably in a number of different areas," he says. "And we've seen a lot of deflationary pricing pressure from what I would call retail price wars — retailers trying to be more competitive with other retailers who have been promoting greater value and better pricing."

That's all translated into negative unit and dollar sales growth in four consecutive four-week periods (through approximately the end of July) within all the categories Nielsen tracks, he says.

"We've also seen brands promoting more in recent periods, I think trying to deliver better value to shoppers," Hale adds, "and also trying to be a little bit more competitive against private label initiatives so they don't lose any further ground. I think we're at an interesting time in terms of what this means for the future — certainly for the next year, I think, some retailers are going to have to think about where they can find opportunities to raise prices."

But that's going to be a difficult task, he adds, considering the current messaging in food, drug and mass merchandise outlets around the value and low prices they're providing to their shoppers.

Retailers also can expect to see the more aggressive national brand manufacturers investing in and delivering "innovation that really matters" to consumers, Hale says.

"And I think it has to be the same on the retailer side, [where they are] bringing in a product that really matters to consumers," he says. "If it's just a me-too without some added benefit, I think there may be an issue with whether or not you're going to get the kind of consumer response you're looking for."

'I think we're seeing that retailers are recognizing there are opportunities for them to venture into new space.'

On the food side, many of the Movers and Shakers seem to fall into that "underdeveloped" territory — and as such, have quite a bit more room to grow.

Consumers' new consciousness calls for separating the true value from the rest of the bunch.