• by Karlene Lukovitz  @KLmarketdaily, April 15, 2011

Private-label makers are looking to capitalize on consumers' growing concerns about recent increases in the costs of many grocery and other everyday items.

The Private Label Manufacturers Association (PLMA) has released a new study that concludes that consumers on average can save 33% off their grocery bills by buying all private-label products.

Over a six-week period (Feb. 12 to March 19), the association tracked bills for market baskets comprising 40 staple grocery, household and personal care items, comparing the total costs for all-private-label and all-branded-product equivalent market baskets.

Products included cleaning items such as glass cleaner, paper towels and pine oil disinfectant; two dozen pantry staples such as cornflakes, pasta sauce and carbonated beverages; and personal necessities such as mouthwash and facial tissue.

The study was conducted in a single, traditional-format suburban market in the Northeast.

Results: Private-label basket bills averaged $84.73 over the period, versus branded-product baskets' average of $127.03, for average savings of $42.30, or 33.3%.

According to PLMA, the national brand and private label products chosen in each category were similar, and prices were adjusted to account for all known discounts, coupons and promotions available for each of the six shopping visits during the study.

Among individual food items, the cost savings ranged as high as 46.8% on carbonated beverages, 45% on ice cream, 43.5% on hot dog buns, and 40% on pasta sauce, the association reports. Savings in many non-foods categories were better, led by aspirin (the store brand version cost 60.6% less, on average), pine-oil cleaner (57.3% less), body lotion (53.5% less) and facial tissue (50% less).

Commenting on the study, Kevin Coupe, editor of Morning News Beat, a newsletter for the retail industry, noted that the results are "no surprise," although the numbers might be different for different areas of the country. "It does illustrate why private brands have seen so much growth through this recession," he added. "The question is whether it continues as the economy improves."

According to a Seeking Alpha report on PLMA's last annual conference, held in late 2010, after growing strongly in 2008 and 2009, sales of private-label foods were flat in 2010, "as brands counterattacked and increased trade and consumer promotion."

Looking at total CPG, The Nielsen Company recently reported that following flat year-over-year performance in October 2010 and a roughly 2% November 2010 increase, U.S. private-label CPG dollar sales remained flat in December 2010. Private-label CPG unit sales declined 2.3% in December, following drops of 1% and 3%, respectively, in November and October 2010.

However, Nielsen executive Danny Brager recently characterized 2010 private-label sales as "very strong," noting that private-label dollar share in supermarkets has grown from 15% prior to the recession to more than 18% in 2010.

Furthermore, PLMA quotes Nielsen data showing that annual sales of private-label products grew by more than $18 billion over the most recent five-year period, and that private label's unit market share in U.S. supermarkets is now 23.5%. And a recent Rabobank analysis projected that globally, private label will double its market share, from a current 25% to 50%, by 2025.

The PLMA study release comes just days after the release of a Market Force Information study that concluded that the distinction between private label and name brands is "fading" among consumers -- who frequently are not even aware that some of the brands they're buying are private label.

"This situation could pose some real challenges for the national brands that must maintain a distinct identity" to warrant their higher prices in consumers' estimation, summed up Janet Eden-Harris, chief marketing officer for the MFI research firm.

In addition, while food and beverage brand strategic consultancy Scion Advisors recently noted that some manufacturers have successfully reduced the weights or sizes of their products while keeping suggested retail prices at the same or even slightly higher levels, media articles calling attention to this practice have become increasingly common.