Private-Label Growth Outpacing Brands

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While private label still represents a small piece of retail wine and spirits volume, its growth rates are considerably outpacing those of national brands, confirms the latest data from The Nielsen Company.

The wine/spirits private-label growth trend was one of many highlighted by Nielsen beverage alcohol VPs/group client directors Danny Brager and Nick Lake in a Feb. 5 Webinar focused on how economy-driven factors are affecting off- and on-premise sales of beer, wine and spirits.

Private-label/exclusive table wine and spirits brands now represent 3.3% and 4.6% of volume within their respective categories in total U.S. food, drug, convenience and liquor stores, per Nielsen.

However, sales volume for private-label table wines and spirits grew 29.4% and 7.8%, respectively, off of those small bases during the 52 weeks ending Jan. 9 versus the same year-ago period. Meanwhile, the table wine and spirit categories as a whole saw volume growth of just 1.6% and 0.9%, respectively.



"Wine is a highly fragmented category, and we believe that in many cases, consumers are not even aware that they're buying private-label wines -- the wines come in attractive bottles and don't actually bear a retailer's name," Brager tells Marketing Daily. Some retailers' private-label spirits brands also tend to fly under the consumer's radar; in other cases, consumers simply view store brands as a good value, he adds.

Meanwhile, in the beer category, the strength of dominant national brands has, at least thus far, discouraged significant competition from private labels.

Beer as a category has also proven to be considerably less vulnerable than wine and spirits to downward pricing pressures. Nielsen found that the average price of 100 leading beer products in food, drug, liquor and convenience stores rose 5.8% between January 2008 and Jan. 9, 2010, including a 0.9% increase during the past year.

In comparison, prices for 100 leading table wines and spirits products in the same classes of trade (excluding convenience stores) have risen just 1.4% and 2.7%, respectively, since January '08. In the past year, the average price among the wines declined 1.4%, while average price among the spirits brands rose 0.4%.

Some of the key off-premise alcohol trends noted during the Webinar:

* Alcohol purchases by retail channel are, by and large, reflecting consumers' overall, economy-driven pattern of doing less shopping in specialty or "discretionary" stores (including liquor stores) as they consolidate trips and focus on grocery and "value" formats such as warehouse clubs, supercenters and dollar stores.

For example, looking at beer dollar sales for the 52 weeks ending Jan. 9, per Nielsen scan and Homescan Panel data, total, cross-channel sales rose 1.7%. Retail channels showing gains included mass/supercenters (7%), drug stores (6.3%), food stores (3.9%) and club stores (1%), while liquor stores showed a 1.9% decline. Most of the overall 1.7% decline in beer volume sales during the 12 weeks ending Jan. 9 occurred in liquor stores (-7.2%).

* Many retailers are taking advantage of the economy-driven weakness in on-premise (restaurant/bar etc.) alcohol consumption by developing private labels and discounting. Pricing wars are common, leaving little or no room for price increases.

* Consumers continue to aggressively seek value via trading down, coupon use, promotion/deal shopping, and emphasizing the "tried and true" over experimentation.

* With food and other types of retailers increasingly pushing to optimize space by honing national brand assortments and increasing space for private label-brands in most categories, including wine and spirits, national wine and spirits brands -- particularly those that are not #1 -- will be experiencing growing pressure. "Suppliers should be prepared to prove that they belong" in the assortment mix, stressed Lake.

* Within optimized assortments, beer items or SKU's on the rise include craft, domestic and super premium varieties (flavored malt beverages are on the downswing). Within wines, those in the $9 to $15 range are on the rise, while other price segments and imports are on the downswing. In spirits, vodka SKU's are growing, while cordials/schnapps SKU's are declining.

* Despite consumer resistance to price increases, alcoholic beverages continue to be very attractive to retailers because they significantly boost overall shopping basket expenditures. Furthermore, among the top 122 product categories by unit growth in food, drug and mass (including Walmart) for the 52 weeks ending Dec. 26, 2009, wine ranked ninth (with 4.7% growth), spirits ranked 20th (2.4% growth) and beer ranked 46th (0.6% growth).

Some key on-premise alcohol trends noted during the Webinar:

* The on-premise scenario for alcoholic beverages will remain challenging this year, but declines will be "shallower," according to Nielsen. Ongoing challenges include continuing consumer financial insecurity, inability to rely on new location openings for growth, increasingly aggressive competition from retail stores, and consumers' now-ingrained expectation of discounting.

* Alcoholic beverages can help restaurants grow traffic, guest check size and profits. Hence the trend to fast casual and even quick-serve restaurant chains adding beer or wine to their menus.

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