Store Brands Reach A New Plateau

The latest research from The Nielsen Co. shows that store brands have reached a new plateau, with unit share flat during the last seven periods versus a year ago. Edibles no longer dominate the list of categories experiencing the fastest year-to-year growth in store brand sales, but we do see faster declines for store brands versus branded items on discretionary items. Let's take a look at what's happening behind the numbers.

A new plateau

We've reached a new plateau for store brands, with 22 percent of unit sales share versus 20 percent prior to the recession. We expect store brands will continue to see moderate growth, fueled by retailers' focus on driving margin and building banner equity, paired with consumers' continued interest in value.

It's less about food basics

Counter to what we've seen in recent times, edibles no longer dominate the list of categories with the greatest store brand sales growth. Looking at the latest year, we see double-digit dollar growth for the fast-growing store brand non-edibles categories, and low to flat growth for fast-growing branded non-edible categories.

Unit and dollar share growth for store brand non-edibles, mostly in health and beauty categories, is likely a function of retailers' ever-increasing focus on store brands and indicative of consumers' positive response to such products. This trend also is related to retailers' new focus in categories where store brand share has been low (e.g., skincare preparations, personal soap/bath needs and cosmetics).

What a difference a year makes

During the latest quarter, 43 percent of consumer packaged goods categories Nielsen tracked experienced price cuts, versus 26 percent in 2009. Retailers have been cutting prices to gain a competitive advantage, or in reaction to other retailers' price cuts. Brands have been promoting more to stimulate sales

and compete against store brand efforts.

Discretionary declines

It's not a big surprise that we see the biggest declines in discretionary categories, for both branded and store brand items. Throughout the recession, we've seen softness in non-edible categories, most notably in general merchandise. Note the faster declines, however, for store brands.

Keep in mind that this does not mean you should stop focusing on these areas. Instead, you should make sure you are aligning assortment in your stores where consumers are more apt to buy discretionary items, given their financial or employment situations.

Additional insights

Some other interesting insights from Nielsen's latest research:

• Store brand share varies widely by category. Of the 117 major categories Nielsen tracks, store brands have a share of 40 percent or higher in 14.
• Store brand share is strongest in commodity categories such as milk, fresh eggs, and sugar and sugar substitutes, as well as in those categories with little differentiation such as first aid and wrapping materials.
• Store brand share is weakest among categories such as candy, gum and beer, where we see strong marketing support for top brands, and in categories such as detergents, deodorant and cosmetics, where we see a high level of national brand innovation.

Straight Talk delivers monthly store brand insights from The Nielsen Co., New York. Todd Hale is Nielsen's senior vice president, consumer & shopper insights.