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PLBuyer Announces Top 35 Private Label Retailers

October 1, 2012
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Welcome to PLBuyer’s annual ranking of the largest sellers of private label food and grocery items in North America. As always we have strive to bring you information you can’t find anywhere else. For this year’s list, we once again partnered with Retail Systems Research, a widely recognized retail research company.

RSR’s Paula Rosenblum discusses the private label marketplace in detail with this analysis and gives her take on the Top 35 list.

See the PLBuyer Top 35 List here! (PDF)

RSR’s Take on Private Label Buyer Top 35

Private label has proven to be the antidote to razor thin gross margins and for many retailers,has been the brightest light in otherwise turbulent times. Topline revenues seem to fluctuate from quarter to quarter, and the number of price changes sent to stores continues to escalate, but for a majority of retailers, selling gross margin continues to rise.

These retailers have found new and creative ways to chase private label sales. Basically, wherever the national brands go, private label brands follow. Towards that end, over the past year they have enhanced their private label offerings to include “good, better, best” options.

For example, CVS added the “basics” line, its value offering, while Publix and Winn-Dixie have added focus on their premium/black label products. Generally, supermarket retailers also have expanded heavily into “natural” and organic products, hoping to capitalize on that trend.

Across the board, retailers are investing heavily in health and beauty categories, as well. For many of the top 35, HBA accounted for a large percentage of private label sales increases. It is a testimony to the consumer’s confidence in private label quality to see sales extending into this category.

Of the top 35, 62 percent saw an increase in the percentage of private label product sold, 22 percent saw a decrease, and the remaining retailers stayed flat as a percentage of total sales.

Walmart is perhaps most notable among those with a decrease in private label sales. In fact when comparing that number with Kroger’s increase, if current trends continue, Kroger soon will surpass Walmart in total private label product revenue.

This was, perhaps, our most surprising finding. RSR believes there are two primary drivers of this change:

• Encroachment by Dollar Stores – Dollar stores have nipped at the edges of Walmart’s market basket by offering familiar brand name products at a steep discount. A recent look at Dollar General’s website, for example, revealed special sales on Maxwell House Coffee, Lysol, and Tide.

Of course, looking further into the assortment, we found lots of private label products, including food storage containers, milk, bleach and other products. Once burned by its SKU-rationalization project (and subsequent consumer revolt), Walmart seems to have shifted its focus back to national brands in an attempt to stop basket erosion.

• Walmart’s Sheer Size Driving Steep Brand Discounts – Walmart might have created some self-inflicted pain when it “rationalized away” thousands of SKUs, but we’re quite certain the consumer products’ manufacturers who were eliminated felt almost equal pain. No supplier can easily afford to let its top line sink as a result of being dropped from the Walmart lineup.

So when leading Wall Street retail analyst Deborah Weinswig reports that “Walmart has committed to investing more
aggressively in price this year,” we can be reasonably assured that its suppliers will share the pain. Interestingly, despite these investments, Weinswig also reports Supervalu andSafeway closing the price gap with Walmart. Retailers remain engaged in a seemingly endless price war – one that only companies with heavy commitments to private label can match.

Certainly the move to private label is not exclusive to the supermarket industry. The combination of private label and exclusive brands is driving sales at general merchandise and apparel retailers such as Macy’s, Limited, Pottery Barn, Gap and American Eagle. However, the dramatic shift in product quality perception is most evident in the supermarket space.

Of course, general merchandise and apparel brands are better able to take advantage of the omnichannel effect, and have become competitive to their wholesale customers. A shopper can buy Ralph Lauren products from Nordstrom or Macy’s (for example), or just buy online (or in-store) direct from the brand. Food and consumer products manufacturers as yet have not been able to match that advantage.

Thus we end with a question: How long will it take for grocery suppliers to do the same? When will we see those brand managers attempt to disintermediate retailers?

Given the brand equity that still remains for those national brands, it seems like it’s only a matter of time.

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