A Tale Of Two Countries

With apologies to Charles Dickens, store brand trends in the United States and Canada might be described somewhat like the title of Dickens' classic. We'd be hard-pressed to say it's the "best of times" or "worst of times" for store brands in either country, but as Nielsen examines store brand performance, we do note some interesting trends.

Without question, you can venture into any U.S. or Canadian pantry and find store brands. Store brands are an $11.4 billion business in Canada and a nearly $90 billion industry in the United States.

Canada boasts an 18.2 percent dollar share, ahead of the 17.4 percent share in the United States. However, store brand dollar share continues to decline in Canada, while store brand activity in the United States, ignited by the recession, has shown an upward trend over the last few years.

Nielsen research shows that on a unit basis, U.S. store brand share stands at just under 22 percent, up 0.1 of a unit share point compared to last year. In Canada, store brand unit sales are down one full share point, to 18.7 percent.

Store brand development in Canada has remained relatively static over the past year, in part because national brands have met Canadians' needs for value by driving more sales through feature pricing. In the United States, we saw some leveling off as brand manufacturers stepped up their promotion support.

Store brand performance varies by department in both countries. In Canada, store brands outperform national brands only in produce and health and beauty. In the United States, Nielsen sees greater development in food and beverage categories, and store brand share growth in all departments except dairy.

Whether your business is in the United States, Canada or both countries, it's critical that you know who your heaviest store brand shoppers are. In the United States, heavy store brand buyers typically are larger households (three or more members) from middle-income families (between $30,000 and $70,000 annual incomes). In Canada, they also come from larger households, yet with higher incomes ($70,000 plus).

In Canada, store brands, on average, are 30 percent less expensive than national brands. In the past year, however, national brands' featured prices have narrowed in on store brands' regular prices, and store brands have increased prices at a higher rate than national brands.

In contrast, in the United States, price gaps between store brands and national brands vary dramatically, depending on the department and category. Food departments have a smaller gap, with store brand prices an average 27 percent lower than branded items. But the gap extends to 53 percent in general merchandise and 72 percent in health and beauty.

So the question, especially for U.S. retailers, is "Do you have your value equation right?" In departments and categories with extreme price gaps, the potential to enhance sales is significant. Just think: A one-cent decrease in the price gap between store brands and branded items across departments measured by Nielsen adds up to $403 million!

While the vast majority of category sales in both Canada and the United States are branded items, store brands likely will continue to grow in both countries over the long-term. Continued economic softness will drive consumers to look for value. Store brand focus will escalate as retailer consolidation impacts the competitive landscape and interest in building store brand share — to bolster profits and enhance the connection of banner brands with shoppers — rises.

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