This is an intriguing post from Todd Hale, TheShopperWonk, SVP, Shopper and Consumer Insight with The Nielsen Company. They have done some great work to create segmentation identifying Private Brand customers.
If You Thought All Store Brand Buyers Were The Same-Think Again!
2008 was a stellar year for store brands in the U.S., with both dollar and unit growth outpacing branded offerings across consumer packaged goods (CPG) categories. Store brand dollar sales within food, drug and mass merchandisers grew 10.2% for the year, while branded dollar sales grew by just 2.6%. Although the gap in unit sales was not as wide, indicative of how store brand dollar growth resulted from inflationary pricing across a number of commodity-based categories, store brand units grew 2.6% for the year, but branded units were off 2.2%. And what should be keeping many branded marketers and sales execs up at night is how store brand unit sales performance was better in the last quarter of 2008 and even better in the last period of the year. This is a pattern which has continued for the first quarter of 2009 and should continue throughout 2009 as our economy continues to struggle with high unemployment and a tough housing market.
Client questions we are frequently being asked these days concern the current and future performance of store brands. The most prominent questions are:
- Does this growth rate reflect what we typically experience in a recessionary period?
- Will store brand growth slow once the economy improves or are we entering a new era of store brand development in the U.S.?
Store brand growth during 2008 is very similar to the gap in sales growth during the 2001 recession. However, with the additional efforts retailers are making to improve store brand packaging, quality and on-shelf presence, we do see store brands being better positioned for growth when the economy improves than they were at the end of previous economic downturns. What may be even more indicative of future performance is the marketing brains and muscle many retailers are putting behind their store brand go-to-market efforts. So consumers forced or enticed to purchase store brands during this recessionary period may be more likely to add store brands to their preferred set of brand choices on a go-forward basis-particularly given how complete and absolute loyalty to a brand is a rarity, usually coming from a small percentage of infrequent brand and category buyers. Most households trade off across a select number of brands depending on their propensities toward flavor, form or size mix and/or the importance they place on promotions and price specials over brand choice.
Now more than ever, marketing to the average consumer or shopper will yield little benefit, as understanding the extremes provide real insights for action. With that in mind, we created a store brand segmentation scheme among our Nielsen Homescan consumer panel. The scheme used actual brand and store brand buying behavior; actual behavior regarding retail channel and retailer shopping preferences; and consumer attitudes towards store brands to identify six unique store brand segments. Understanding which of the segments are drivers of store brand share growth, and the attitudes of those consumers, can help predict the degree of longer-term impact (at a macro and individual category and brand level) and should weigh heavily into plans for how both manufacturers and retailers should plan future growth.