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Top 35 Private Label Retailers 2011

March 30, 2012
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Walmart again towers over others on PLBuyer’s annual list of the largest North American retailers of private label food and grocery items.


Walmart again towers over others on PLBuyer's annual list

Editor’s Note: Welcome to PLBuyer’s annual ranking of the largest sellers of private label food and grocery items in North America. As always, we have striven to bring you information you can’t find anywhere else. For this year’s list, we partnered with Retail Systems Research, a widely recognized retail research company, to delve more deeply into who was selling what in the private label world during 2010. We’ve also refined who we include on the list. This year, for example Trader Joe’s and Sam’s Club are broken out separately from their parent companies. While Trader Joe’s and Aldi’s U.S. operations are owned ultimately by the same German parent, they do operate independently in the States and compete in certain markets so we thought listing them independently better reflected market realities. The same is true of Sam’s Club and Walmart which compete for consumer dollars in markets across the country.
This year’s list also includes wholesalers such as Wakefern, but lists only their retail private label sales as is noted in RSR’s analysis here. And while RSR’s Paula Rosenblum discusses the private label marketplace in detail following this introduction, we also asked her to detail one facet of the top 35 that surprised her while doing the research on the list for us.
“While almost anyone can appreciate the size and scale of Walmart, it doesn’t hit home exactly how large and influential they are until you start looking at the numbers,” she recounts. “Walmart’s estimated private label sales alone are as large as the next three top private label sellers combined (Kroger, Safeway, and Costco).
“However, it is also important to note that smaller retailers can still wield a tremendous amount of influence over the space – as Trader Joe’s and Aldi testify,” she adds.
Further, “the performance of drug stores is also very impressive. Considering how narrow the categories are for drug stores selling private label, with their much smaller overall product assortment, it’s somewhat surprising to find Walgreens and CVS so high on the list.”
 
RSR Analysis
 
An early major impact on grocery retailing during the economic downturn was consumers’ rush to low-cost private label products as they sought to save every penny possible.

With continued economic uncertainty, the opportunities for private label is only getting larger; private label brands continue to become more sophisticated and fill niche markets and price points national or global brands miss.

Most importantly, private label merchandise quality seems to be an overall focus area for retailers - from 2009 to 2010, retailers participating in RSR’s PL research reported quality as a component to all three of their top three business challenges (see chart, page 18), and the opportunity to improve quality rose in importance by 22 points in the space of one year.

Top private label retailers like Costco, Publix and Trader Joe’s continue to reap the benefits of a positive quality perception. Others have stumbled and have changed packaging and messaging, and also added new brand names to highlight good, better, best options for consumers.

In RSR’s research on private label management, we also have found that larger retailers (those with annual revenue greater than $1 billion) tend to be more aggressive in their pursuit of private labels: 35 percent of these large retailers reported that they had increased the number of private label SKUs in their assortment by more than 10 percent in our 2010 research.

This year’s results are consistent with these findings. In last year’s analysis, the top 30 retailers by private label sales volume accounted for an estimated $149 billion in private label grocery sales; this year, they accounted for $167 billion. Overall share of grocery sales that are private label among the top PL retailers also increased - from 22.9 percent in 2009 to 23.6 percent in 2010.

However, finding these numbers is no easy feat. Even for companies that are otherwise fairly open and public, private label sales figures can sometimes be a closely guarded secret, in part reflecting the highly-competitive environment, both among retailers and sometimes between retailers and manufacturers.

We found it interesting, however, that more public information was available this year than last year; more retailers are reporting on the health of their private label brands, either directly to investors through analyst calls and annual reports, or to the public at large via earnings press releases. In turn, investment banks and financial analysts also seem to be paying more attention to PL success stories - they understand private label’s value in contributing both to long-term retailer brand loyalty and bottom-line margin opportunities.

Private label sales for this year’s PLBuyer Top 35 Retailer list were compiled using multiple sources, including publicly available information from the retailers themselves, whether through investor information, press releases or presentations. Where public information was not available, RSR evaluated input from a major financial analyst firm, other public estimates of retailers’ private label shares, and anonymously-provided input directly from certain privately-held retailers. In cases where such information was not available, RSR made its best estimate, either using SKU or store analysis, or another estimation method. All sources are noted in the analysis.

One interesting fact our research pointed to is that, in addition to traditional food retailers, other retail verticals also are getting in on the PL game. This year’s list of the top North American private label retailers was expanded to the top 35 compared with last year’s 30 in part because of a need to recognize that drug and convenience stores, as well as wholesalers, play a significant role in the private label market.

In particular, wholesalers pose an interesting hybrid model for private label. Rather than providing name-branded private label products, they have developed
targeted brands that become part of the wholesale or cooperative buying model.

If an independent retailer is part of the Wakefern or Nash Finch family, for example, the retailer has access to significant private labels that shoppers won’t find at national competitors. This offers an interesting value proposition from the wholesaler to the retailer, and for the retailer to the shopper.

Note, however, that we evaluated the power of those brands only from the retail side; wholesalers’ numbers are based on their retail revenue, even though some of their brands are worth literally $1billion+ on the wholesale side.

Paula Rosenblum is widely recognized as one of the top analysts in the retail industry. She formerly served as vice president of research & content at Retail Systems Alert Group (RSAG), and as vice president of Aberdeen Group’s retail research practice. She also was retail research director for AMR Research. Previous to that, Paula spent more than 20 years as a retail technology executive and CIO. Paula received her MBA in 1991 from Northeastern University, with a major in management of high technology firms and was nominated to the Beta Gamma Sigma honor society.

Retail Systems Research (RSR) is the only research company run by retailers for the retail industry. RSR provides insight into business and technology challenges facing the extended retail industry, providing thought leadership and advice on navigating these challenges for specific companies and the industry at large. Learn more by visiting
www.rsrresearch.com.

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