Brandweek reported on Wednesday, Feb 4, 2009 in an article titled: Private Label Takes Bite Out of Kraft Profits that Kraft reported a 72 percent drop in fourth quarter profits, their profits have taken a beating as consumers have cut back. Kraft CEO Irene Rosenfeld said during the earnings call: “Combined with the spike in unemployment and rapid deterioration of consumer sentiment, it’s not surprising that branded consumption was down and private label picked up share.”
In a research note, UBS analyst David Palmer attributed Kraft’s disappointing quarters to the companies’ vulnerability to private label. “These are two of the more penetrated by private label companies in the food space, and thus, each company’s pricing is more affected by falling commodity costs and more aggressive private label competition,” he said. So the question for the retailer is really will you take advantage of the downturn and grow Private Brand share, investing in quality, marketing and innovation or will you simply defend. The retailers who capitalize on the weakness of both their competitors and the national brands will grow their market share and have the opportunity to drive customer loyalty, create true differentiation and reinvent the way the American public perceives both retailers and the brands they carry.