Private Label ...Mind that Gap

1.
Private Label …
Mind that Gap
The growth of Private Label has accelerated in recent years, fueled by the economic downturn that has shoppers looking
for more and more ways to save. Private Label sales increased significantly in 2008, and growth continues into 2009,
although it does show some signs of leveling off.
Where is this sales growth coming from? Not from more buyers. Virtually every household is buying some PL items,
with penetration already at 100% among a static sample of shoppers. The growth is driven by an increase in Private
Label spending per household, driven by consumers purchasing Private Label in more categories across the store than
ever before.
Private label growth in terms of both volume and share varies greatly across categories. However, there is a clear
correlation between price gap and Private Label share growth. Price gaps have widened in recent years as national brand
manufacturers have raised everyday prices, and retailers have increased promotion of Private Label, helping to fuel
growth of Private Label across many categories.
The chart below illustrates the price gap effect. Categories in which Private Label experienced moderate to strong share
gains were those in which price gaps widened, with Private Label selling at a greater discount (by two percentage points)
to national brands. Categories in which Private Label declined in share, on the other hand, were those in which price
gaps narrowed, with Private Label selling at a lesser discount to national brands.
Average Price Gap Point Change, Private Label vs. Branded
6%
Avg. across 4%
categories 2% 2%
within each
PL growth
segment
-1% -2%
Strong Decline Moderate Decline Small Decline Small Gain Moderate Gain Strong gain
PL Growth Segment
Source: Spire Loyalty Panel, 52 weeks ending June 2009 vs. YAG.

2.
Spire also assessed which factors have contributed to Private Label’s growth, which has been strong in some categories
and lackluster in others. Private Label growth has been particularly strong in routine purchase, center-store categories, in
which price gaps have been particularly pressured, and Private Label promotion has accelerated. Private Label growth
has been significantly more restrained in impulse categories, perhaps because these categories tend to be more
prominently displayed than others. Consumers may also tend to be more price-sensitive on planned purchases than on
impulse purchases. Categories in which national brand products are differentiated on the basis of package innovations
also appear to be experiencing more moderate Private Label share growth, perhaps because these branded products offer
a tangible benefit that is apparent to consumers at the point of purchase, prior to consuming the product.
As retailers have continued to expand Private Label offerings across the store, an increasing number of retailers are
developing tiered programs, supplementing “mainstream” Private Label products with extreme-value offerings and
premium Private Label products. The presence of an even lower-priced value tier of Private Label products has further
fueled Private Label growth in certain categories, particularly in these challenging economic times.
Look for more “InSpirations” in the coming months on the subject of Private Label trends, and the many different ways
consumers may shop Private Label.
Spire, LLC is a consumer centric analytic services provider. Working with both CPG manufacturers and retailers, Spire leverages their proprietary Loyalty
Panel to provide insights on consumer trends, shopping behavior, new product performance, and the consumer impact of pricing and promotion.