Aldi offers a 90 percent assortment of private brands.
Garett Chau had plenty of good things to say about the state of private brands during his seminar, “Understanding Private Label Trends,” at the Private Label Trade Show last week in Chicago.
It’s not the first time this year that the the current success of the private brands industry has been gloated over. But some of the things Chau said during his presentation further cement that private brands are growing, if not booming, in consumer packaged goods (CPGs).
“The growth trends we see are not cyclical,” said Chau, Nielsen’s senior vice president of professional services. “They are real and will continue.”
During the Great Recession of the late 2000s, Chau noted that many consumers turned to store brands to save money. But when the economy healed and expanded, consumers continued to seek them out for value and quality. And that includes consumers across all income brackets, Chau said.
While the current market share of private brands is only about 15 percent across total U.S. retail stores, Chau expects that number to soar.
“Within the next decade, we will see private brands market share grow to 25 to 30 percent in the U.S. For national brands that means a distribution loss of 10 to 12 points [of market share],” he added.
According to Nielsen statistics, private brands market share grew 4.3 percent in the last year, an acceleration from the previous period. Food and beverage market share in private brands is up a whopping 17.5 percent, Chau said, noting that growth isn’t limited to only a few categories and is systematic across the entire store.
Increased distribution of store brand products is behind most of the gains.
“There are more private label items on more shelves in more stores,” Chau stated.
Retailers have done a “phenomenal job” of improving the quality and perception of their own brand offerings, he added. They have also excelled at tapping into burgeoning trends and innovating quickly.
“They are true differentiators,” Chau added.
While sales of premium private brands grew nearly 10 percent in the last year, they account for only 8 percent of all private brand CPG sales, which tells Chau there is more room for growth.
“Premium products account for about 20 percent of branded sales, which is more than double [that of private brands]. So there’s a real opportunity for premium products in store brands,” Chau said.
To take advantage of the growth, Chau told private brand manufacturers to work with retailers that have a vision and commitment to private brands. He also told manufacturers to help retailers “feel the gaps” in their private brands programs.