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Consumers Raise Their Glasses to Private Label

February 16, 2010
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New research from The Nielsen Co., New York, reveals that although store brand shares remain in the low single digits, private label wines and spirits outperformed their national brand counterparts over the past year, as budget-conscious consumers sought out less-expensive alternatives to their adult beverages of choice.


New research from The Nielsen Co., New York, reveals that although store brand shares remain in the low single digits, private label wines and spirits outperformed their national brand counterparts over the past year, as budget-conscious consumers sought out less-expensive alternatives to their adult beverages of choice.

During a Feb. 5 webinar that explored the relationship between alcohol sales and the economy, Danny Brager and Nick Lake, Nielsen beverage/alcohol group vice presidents, said private label wine and spirit unit sales across all formats, including convenience and liquor stores, grew 29.4 percent and 7.8 percent, respectively, over the 52 weeks ending Jan. 9, while sales for those two categories as a whole edged up just 1.6 percent and 0.9 percent. As a result, store brands now represent 3.3 percent of total table wine sales and 4.6 percent of total spirit sales.

According to Brager, the poor economy deserves much of the credit for store brands' recent success, but he told eReport that retailers have made the most of the opportunity by giving the two categories the attention they deserve.

"Retailers are spending more time ... developing those businesses and giving them an identity," he explained. "They recognize that the private label wine and spirits businesses, though relatively underdeveloped today, can both add to their margins and enhance customer loyalty to their stores."

Brager added that the wine category is particularly ripe for private label development because it is already very fragmented. And unlike, say, beer or cola consumers, wine drinkers like to "experiment" with different products. Moreover, he remarked, many wine buyers report finding good-quality wines, including store brands, at lower prices.

In fact, Nielsen's research shows that, although sales of higher-priced options picked up during the holidays, wines priced below $15 and "value" and "mid-tier" spirits continued to post positive numbers through the 52 weeks ending Oct. 17, 2009, while sales of more premium choices plummeted. The change in consumer preferences already is being reflected in retailers' assortments, where wines priced between $9 and $15 are gaining shelf space while higher priced options, including imports, are losing ground. In the spirits category, meanwhile, vodka is snapping up additional space at the expense of cordials and schnapps.

As retailers continue to hone their assortments and make more room for store brands, "Suppliers should be prepared to prove that they belong," Lake said, pointing to makers of non-number-one brands, in particular.

Although prices for 100 top-selling wines and spirits have risen just 1.4 percent and 2.7 percent, respectively, since January 2008, reflecting both categories' vulnerability to pricing pressures, they remain attractive to retailers because of their high price per unit and ability to significantly expand basket size. In addition, wine (+4.7 percent) and spirits (+2.4 percent) ranked ninth and 20th, respectively, on Nielsen's list of unit sales gainers across food, drug and mass (among the top 122 categories) over the 52 weeks ending Dec. 26, 2009. Beer came in at number 46 (+0.6 percent).

Despite store brands' recent success in the wine and spirits categories, private label hasn't been able to crack the much bigger beer category yet.

"The industry has already segmented to meet the needs of the cash-strapped consumer by producing high-quality below-premium and budget brands," Lake explained. "Private label knockoff attempts have been only marginally successful because the beer business is brand-driven, and consumers have an emotional investment in their brands."

In addition, the beer category hasn't been nearly as susceptible to downward pricing pressures as the wine and spirits segment. In fact, beer prices increased 5.8 percent since January 2008, including a 0.9 percent rise over the past year. In addition, although sales of below-premium beers grew faster than the category as a whole while premium and imported sales failed to keep pace, sales of pricey craft beers shot way up during the same period, creating sort of a barbell effect.

In terms of channels, Nielsen's research shows that more alcohol purchases are being made in both grocery and value formats, including warehouse clubs, supercenters and dollar stores, reflecting a general shift away from specialty stores, including liquor stores.

For more information, visit http://www.nielsen.com. - Denise Leathers

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