Rising commodity and food prices driving private label

by FoodBusinessNews.net Staff
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PHOENIX — The growth of private label products is being driven by rising commodity and food prices and is not the result of consumers abandoning national brands, The Nielsen Co. said at its Consumer 360 Conference, held June 3-5 in Phoenix.

"When private label dollar share started to spike, it appeared that shoppers were shifting to store brands in order to save money," said Tom Pirovano, director of Industry Insights for Nielsen. "That’s always been the conventional wisdom during economic downturns. Digging beyond the numbers, however, it’s clear that private label unit share is essentially flat. Higher prices in commodity categories like eggs, milk and cheese are driving private label dollars, not consumers deserting traditional brands."

During the past year, private label sales of consumer packaged goods products grew almost 9% to $50 billion in supermarket sales, which is about 18% of supermarket dollar sales. While dollar sales of private label are up, unit sales are down slightly, and this indicates higher unit pricing is driving growth. Top-selling private label products tend to be items with limited profit margins that are most impacted by an increase in shipping or raw materials such as eggs, milk and cheese.

The top markets for private label include San Antonio; Columbus, Ohio; Louisville, Ky.; Buffalo/Rochester, N.Y. and Memphis, Tenn. The bottom of the market for private label is New York City.

Nielsen said while rising prices are in part responsible for the growth of private label, these products are gaining share of wallet and mind with consumers. Opportunities for growth include more in the organic, natural, and health and wellness categories.

At the conference Nielsen also said seafood, dry pasta, candy and pasta sauces are among some of the most recession-proof consumer packaged goods categories.

The most recession vulnerable categories include carbonated beverages and eggs.

"Consumers are feeling the squeeze as they are caught between rising costs and lower spending power," said Eugene Roytburg, managing director for The Nielsen Co. "As a result, many consumers are reprioritizing or altogether changing their pending habits. For C.P.G. manufacturers and retailers, this requires a change in the way you market to consumers and knowing which of your products are most affected by a recession will help you maintain focus on the right categories and brands in order to succeed."

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