Back when the recession began, American consumers couldn’t get enough of private-label products, often vowing that their frugal aversion to name brands was a permanent state. And to be sure, dollar sales of private-label products have been growing.
But market share has leveled off, even as the economy has recovered. And a new analysis from the Hartman Group reveals some surprising — and counterintuitive — insights about the categories where consumers are indifferent to name brands, and those that are so solid Hartman has dubbed them Brand Fortresses. James Richardson, SVP of Hartman Strategy, fills Marketing Daily in on the trends:
Q. So what is the most surprising development in the battle between name brands and stores’ private-label products?
A. Well, we knew there was a tremendous difference in categories. In milk, for example, private label has 60% or more market share. But — and this is surprising, given the hype around private labels — in categories like canned ham and toaster pastries, it’s as low as 1%. But what surprised us most, and led us to this research, is that brands aren’t exploring and competing more in some of the fastest-growing private-label categories.
Q. So where could brands put up a better fight?
A. Private-label growth engines tend to come from the fresh-food perimeter, where brands for the most part have not entered — chilled pizza, chilled ready-to-eat meals, and prepared salads, as well as from dinner ingredients like cheese and olive oil. Every frozen food manufacturer could be selling their brands in a chilled format. Branded guys could be running away with this business, but they’re not. And it’s fascinating because this is the hottest growth area, not just in terms of private-label sales, but in terms of consumer behavior.
Q. So that’s where national brands are weak. Where are they strong?
A. We call these “the branded fortress,” things with both a strong brand heritage, relatively low price points, and a hard-to-imitate flavor. It is very hard to find a private-label Ritz Cracker that tastes like a Ritz. (Back to Nature makes a good one.) But it’s hard to mimic a Ritz.
Q. What about this 2009-inspired frugality that we all swore was permanent?
A. What’s ironic is that the private-label growth engines aren’t cheap products, but the expensive ones — prepared meals, for example, or bagged salads. These are trade-up categories.
Q. So what should smart retailers do?
A. Newer, trendier snacks, especially salty snacks, present a great opportunity for retailers looking to expand private-label sales. Safeway and Kroger are doing a lot here. I’m talking about things like Popchips and Kind bars — these emerging brands aren’t iconic yet, so we see a potential for premium private-label products to outflank them.