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Manufacturers’ Actions Fight the Tide of Private Label Share Gains

Over the course of this deep recession, private label sales have grown substantially over 2008 (+2%) and 2009 (+1.1%), but may be stabilizing in 2010 as reported in today’s Ad Age article, at about 13.8% in household/psl goods.  Jack Neff, the author, makes the point that Brands will have difficulty recovering share lost to private label for many CPG categories, as the private label products are delivering well enough on consumers’ needs.  Here are some of the actions Manufacturers are taking to win back some of that lost share. 

Manufacturers are focusing on package design to differentiate and communicate at shelf:

  • Just today, Ad Age reports P&G’s focus on packaging to differentiate itself at shelf and the challenges the retail environment poses.
  • Campbell’s focus on packaging  resulted in a revamp of its soup packaging, to stimulate an emotional response as well as make it easier to find the “right” product faster.

They are augmenting this with ad spending to drive share growth:

  • Although magazine ads sales in Q1 were lackluster, (# pages down 9.4%), there are signs of renewed vigor in that sector.  Toiletries and cosmetics ad $ and pages actually grew substantially in Q1, and CPG giants like Heinz, Clorox, and notably P&G have  increased their ad spending, reflecting the theory that increasing share of voice beyond market share will lift market share.

Driving sales growth will depend on the Brand’s ability to sell both the consumer and the Retailer:

  1. Differentiate the Branded products from private label based on tangible and emotional benefits, to get the consumer off the price focus.
  2. Make it worthwhile for the Retailer to stock this Brand – by providing products (and supporting them) that not only meet sales targets but can demonstrably increase category sales, increase basket size or trips, or increase commitment to this Retailer’s site. Retail Leverage has some insightful thinking on this. 

Marketing research often plays key role in assessing a product’s potential to not only entice shoppers, but to help build the Retailer’s business. We work with both Manufacturers and Retailers illuminate consumer response to products both in isolation, and in context at shelf.

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