About one year ago, Information Resources Inc. predicted that private label in the United States had hit a proverbial glass ceiling. This prediction has proven true, at least at the macro level, according to the latest IRI Times & Trends report, "Private Label and National Brands: Paving the Path for Growth Together."

Both private label and national brands' shares of sales remained unchanged during the past year, with private label share of dollar sales inching up slightly, largely due to above-average price inflation within the private label sector. But, the report goes on to illustrate that consumers' "new normal" puts value in the crosshairs of every purchase decision and paves new roads of opportunity for private label and national brand CPG marketers.

"While some industry experts believe private label has 'had its day,' IRI believes that private label and national brand marketers can enjoy mutual growth by not simply co-existing, but rather evolving and working together to serve the full spectrum of consumers' needs and wants," said Susan Viamari, editor of Times & Trends at IRI. "Of course, consumers are shopping conservatively and looking for money-saving options, so they have embraced private label. However, national brands remain critical. In this environment, manufacturers and retailers must work together to provide a balanced assortment of national and private label solutions, targeted at the store level, to offer the best overarching value."

Channel trends

Private label share is highest in the grocery channel, at 21.9 percent of unit sales and 18.2 percent of dollar sales. Grocery also enjoys the strongest level of private label penetration, by far, at 96.9 percent. Despite the fact that the private label landscape has become more crowded and more competitive, grocers have done a commendable job of protecting share.

In addition, private label performance within the drug channel has been quite strong during the last year. Unit share grew one full point, to 17.6 percent, while dollar share climbed less sharply, to 16.9 percent. Though private label share inched up slightly in the convenience channel during the same time period, it remains well below industry average, at 2.4 percent and 1.7 percent, respectively. Private label's strength across the drug and convenience channels is attributable to a number of factors, including retailer efforts to broaden and enhance private label programs.

The club channel is demonstrating the strongest private label share growth — growth that is occurring across both heavy and light purchasers of private label products. This growth brought the channel nearly $1.4 billion more in private label sales from heavy and light buyers in 2013 compared with 2010.

Category trends

Private label share of volume increased across five of the 10 largest private label categories during the past three years. These categories are viewed as "staple" categories, since consumers tend to see little differentiation between private label and national brand options in these categories. Combined, share victories brought more than $2.6 billion to private label marketers' top lines during the past year alone.

National brands are also demonstrating strength in important private label categories. During the same period, national brand marketers gained ground in the remaining top five private label categories, increasing the revenue they generate in these categories by a combined total of more than $1.7 billion across IRI's multi-outlet geography. The biggest win for national brands is evidenced in the vitamins category, where volume share climbed 6.9 points since 2010.

According to the report, in the coming months and years, consumers will continue to look to both national brands and private label solutions to find the best value for their money. To deliver, savvy marketers from both sides will focus on one or more of the following growth strategies: deepening penetration, fracturing concentration and strengthening of price and promotion strategies.

"Private label is clearly here to stay," said Viamari. "For private label to prosper, it is critical for private label marketers to understand the role of their brands in relation to competing national brands. And, national and private brand marketers must step up their collaborative focus, directing their efforts to retailer-manufacturer partners that 'best fit' their strategic goals and objectives. This type of strategic collaborative marketing partnership will increase sales and strengthen customer loyalty by getting the right products to the right place at the right time, with a targeted value proposition."

Read more about retail marketing.

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