Private Brand: Prices, Promotions, Recessions & Recoveries

\"\"This past week the United States Department of Agriculture Economic Research Service (ERS) released a new report on Private Brand written by Richard Volpe titled, The Relationship Between National Brand and Private Label Food Products: Prices, Promotions, Recessions and Recoveries. ERS is a primary source of economic research and analysis from the U.S. Department of Agriculture, providing timely information on economic and policy. I am not sure why the government decided to invest our tax dollars in this research, despite the fact that it is mildly intriguing it does little more than validate what America’s retailers already knew

What Is the Issue?
One of the most striking changes in U.S. food retailing over the past two decades has been the rise of Private Brands, also known as private labels (PLs) or store brands. Retailers have expanded PL product offerings across the supermarket, and PLs have increased in popularity, as measured by both dollar sales and shares within product categories. Since promotional competition between PLs and national brands (NBs) has the potential to benefit consumers through lower prices and expanded product choices, this report quantifies the magnitude and dynamics of PL price discounts and then tests for NB/PL strategic promotional interaction. Particular attention is paid to how the 2007-09 recession and subsequent recovery affected NB/PL interaction, showing how price dynamics evolved from recession to recovery.

What Did the Study Find?
Retailers promote private label products (offer price discounts) strategically in response to national brand pricing promotions to protect PL sales during NB promotions. However, the extent of the retailer response varies widely across supermarket departments and is also affected by both the density of food stores and the market share of supercenters within a market area.

  • On average, PLs are priced about 23 percent lower than NBs, both with and without promotions. This gap is smaller than that found in previous analyses using older data, suggesting that these items may have become more comparable in price and quality over time.
  • NB/PL promotional interaction was strongest among processed, storable products, but much weaker for produce, fresh meat, and seafood.
  • In general, as market concentration increased within an area, the intensity of within-store NB/PL promotional interaction also increased.
  • NB/PL promotional interaction lessened, however, as the market share of supercenters increased, which may be due to supermarkets focusing on everyday low prices generally, rather than on promotions, when competing with supercenters.
  • Promotional activity for NBs changed very little during the recession, while PL promotional activity increased.

How Was the Study Conducted?
This study used 2008-10 data on prices and promotions for two major supermarket chains that operate primarily in the Western United States. The data were gathered directly from the corporate web sites of the chains. The broad scope of the data, covering thousands of the products available in each supermarket and over 250 product categories in every major department, allowed for the study of NB/PL interaction across a wide range of product dimensions. The intrastore promotional interaction between NBs and PLs was analyzed using contingency tables and then regression analysis was used to identify key determinants of NB/PL promotional timing. Because the time series included a part of the recent recession as well as the subsequent recovery, the analysis allowed for NB/PL interaction to vary across these economic phases.

In this report …
Chapters are in Adobe Acrobat PDF format.

Charts and graphs (in .png format) from this report are available in the .zip file listed below. The .zip file also contains a document (readme.txt) that lists the name and title of each chart or graph file.


Morrison\’s Nabs Belinda Youngs to Build Private Brands

Morrisons chief executive Dalton Philips has underlined his determination to grow the supermarket chain by appointing four new senior managers.

Mr Philips, who replaced Marks & Spencer-bound Marc Bolland in March, said the appointments will drive his plan to make the Bradford, England based group \”different and better than ever\”.

\"\"The UK\’s fourth-biggest supermarket chain behind Tesco, Asda and Sainsbury\’s, faces a tough 2011 from resurgent rivals, increasing costs and downbeat consumers. While its growth has outstripped competitors for much of the past two years, it has slipped back recently.

In October, Mr Philips outlined plans to expand into convenience and online retailing, plus enhance its Private Brands.

Mr Philips, who joined from Canadian grocer Loblaw, said the hirings \”represent a big step forward in the strength of our operational and strategic capabilities and the pace at which we can execute\”.

He added they reflect the group\’s ability to attract \”the brightest and best talent\”.

Belinda Youngs joins as own-brand director from grocery chain Sobeys in Canada, where she was chief marketing officer. She will be responsible for all Morrisons\’ private brand work, \”developing the Morrisons\’ own label as a leading brand\”.

Ms Youngs, who will report to Mr Hodgson, is said to have extensive label development experience and has held senior trading and buying posts with Sainsbury\’s.

Source: Yorkshire Post


Kroger Expands Private Brand Beauty – Mirra


Cincinnati based supermarket chain Kroger is continuing its push into the beauty side of HBC by increasing the penetration by double-digits of its Private Brand Mirra that was launched late last year.

According to an Associated Press article:

\”This was a very big leap for Kroger,\” said Susan Scherer, who manages its beauty business. Kroger, with nearly 2,500 stores in 31 states, has made store brands a high priority, saying the products build customer loyalty. Store brands also usually have bigger profit margins than national brands. Corporate brands account for 34% of Kroger grocery items sold and 26% of grocery revenue.”

Kroger offers more than 20,000 store brand items, a 25% increase in the last two years. Fewer than 100 are under the Mirra brand that includes shampoos, face creams and accessories such as makeup brushes and loofahs. But that\’s up from 41 three months ago.

CEO David B. Dillon said Kroger identified health and beauty as an underdeveloped area among store brands.

\”The kind of customer that we have comes to us for things they need on a regular basis,\” Dillon said in an interview. \”Health and beauty items, you don\’t consume them like food items, but you do use them up pretty regularly; so you go back for replenishment, and those are the kind of items that are our forte.\”

Meanwhile, Kroger\’s next additions to Mirra\’s lineup will be anti-wrinkle products with retinol-A, with more new products next summer, Scherer said. Marketing that has so far relied on in-store demonstrations and word-of-mouth will step up this fall with national advertising inserts and coupons.

Read the entire article.


Grocers Private Brand Share to Specialty Retailers

\"\"Specialty food retailers, such as Trader Joe’s and Whole Foods, have capitalized on renewed consumer interest in and acceptance of private label foods and enjoyed greater growth in store brand product sales between 2005 and 2009 than traditional supermarkets, according to Private Label Food and Beverage in the market research publisher Packaged Facts.

Packaged Facts estimates private-label food and beverage dollar sales totaled $87 billion in 2009, to account for 17% of total food and beverage retail sales in the United States. Dollar sales rose 6% over the 2008 level of $82 billion, driven primarily by a 7% increase in the food market. Private-label beverage sales rose less than 1%. Private label’s penetration rate was at 14% of total food and beverage retail sales in the beginning of the 2005–2009 period, but began to rise in 2007 as the economy showed signs of slowing. Hitting 15% in 2007 set the stage for a jump in 2008 as the penetration rate grew to 16%.

The report found that traditional supermarkets and grocery stores are losing market share to alternative stores. Growth among traditional food and beverage retailers was modest at a compound annual growth rate (CAGR) of 4% between 2005 and 2009. Perhaps most notable was the growth in specialty food stores Whole Foods and Trader Joe’s, which grew at a CAGR of 14% during the 2005–2009 period. Supercenter stores such as Walmart and Target also witnessed high growth at a CAGR of 9%. Club stores, such as BJ’s Wholesale, Costco, and Sam’s Club grew slightly better than the mean at a CAGR of 6%. At the low end, discount supermarkets, including SuperValu, Aldi, and dollar store Dollar General saw food and beverage sales actually decline in 2009 from the level seen in 2008. Still the group managed to eke out a small five-year gain growing at a CAGR of 2%.

“Private-label food and beverage have eclipsed their ignoble past of no name and generic products with the development of new flavor varieties, enhanced product packaging and different pack sizes, and the emergence of premium lines,” says Don Montuori, publisher of Packaged Facts. “Plus private labels entered into new territory where the additional power of the retailer name and its inherent benefits are aiding private labels to emerge as brand name. Store reputation alone may be the driving force in the success of chains such as Trader Joe\’s and Whole Food Markets in attracting more affluent consumers to the category.”

Private Label Food & Beverage in the U.S. , from Packaged Facts, analyzes the U.S. market for foods and beverages sold under the proprietary labels of retailers, referred to in the trade as private-label or store-brand products. The primary focus is on the mass-market products sold through supermarkets, big box, warehouse clubs, and mass merchandisers, but the report also examines trends affecting other food and beverage retailers, including convenience stores, drugstores, health and natural food stores. Included are estimates of total dollar sales, unit sales and average prices per unit for the 2005-2009 period along with forecasts for growth through 2014. For further information, please visit:


Theo Albrecht: Private Brand Visionary Dies at 88 – ALDI

\"\"One of the founding brothers of the Aldi discount supermarket chain has died at the age of 88. Theo Albrecht goes to his grave as one of the richest men on the planet with a fortune in excess of $16 billion.

Together with his brother Karl, two years his senior, he created the notable no-frills grocery chain Aldi – which is derived from ‘Albrecht Discount’ for their roles as Private Brand visionaries they were inducted into the Private Brand Hall of Fame in 2009.

His death was announced by a representative of the company he owned, Aldi, which also owns the Trader Joe’s chain in the United States.

The stores are hallmarked by their no frills merchandising with products displayed on pallets, and no chic decorations or piped muzak.

Theo was born on March 28, 1922 – and for him and Karl, the retail trade was in their blood.

Their mother set up a small grocery shop in Essen after their father, a miner (and later a baker\’s assistant), developed the lung condition emphysema. Determined not to follow their classmates into the mines and factories, Karl trained at a deli, while Theo learned the grocery business from their mother.

After being released from Allied prisoner-of-war camps following World War II, Theo and Karl Albrecht took over their parents’ small grocery in the Essen and, out of necessity, sold only a small number of essential items. When the economy began to boom, competitors added to their inventories, but the Albrecht brothers realized they could operate more efficiently by limiting selection and keeping stores small.

The brothers stuck to that business model as they steadily expanded throughout Germany and eventually Europe and overseas markets, including the United States.

Although Theo remained involved, like his brother, in the running of the company, a panel of other family members and representatives has helped manage Aldi in recent times.