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We’re in the midst of the winter holidays, so it’s that time of year to start looking back at the year behind us in anticipation of what the next year will bring. With cautiously optimistic numbers starting to come to the fore for U.S. economic growth and unemployment, the prospects for private label are more interesting than ever.
By most accounts, private label brands have had a good year. Overall, the PLBuyer Index is up over 100 however you measure it—for the 52-week rolling numbers, the 4-week numbers compared year-over-year (YOY), and for the year-to-date YOY trend. The 52-week rolling numbers were not always so positive, but they began a climb in March 2013 that has yet to subside.
Anything over 100 on the Index reflects where private label’s share of revenue has improved over the year-prior period. Most of this growth has come primarily from capturing increases in price that were not offset by declines in units sold. Private label currently still operates at a -18.9 percent price differential vs. national brands, but the 2013 price differential has improved in every period vs. national brands.
Different categories have achieved varying levels of success in capturing price increases. The General Merchandise (GM) category has been on something of a wild ride, even looking at the 52-week rolling data: Every month since we’ve been reporting, general merchandise has lowered its prices against national brands compared to the prior period, and yet achieved an increase in share of revenue by making it up on unit sales. However, in the last 4-week period for GM, it all fell apart—even though private label prices were 27.4 percent lower than national brands (vs. 23.1 percent lower during the same 4-week period in 2012), unit sales were not enough to make up the difference for share of revenue. The 4-week Index number for GM fell from a starting point of 102.8 in the period ending February 24, 2013, ending in October at 62.8.
Bakery and Deli, on the other hand, have achieved some remarkable results. Bakery’s 52-week rolling Index number is 146.6 for the period ending October 6, 2013. And Deli’s Index is currently at 152.2. Bakery has also been playing a delicate balancing game between price and units, operating at a larger price differential compared to national brands than the year before. However, unlike in GM, this slightly lower price has yielded big improvements in unit sales, which have driven the category’s private label performance.
For Deli, it seems there is no upper limit on the price increases that private label products in the category can take. Deli prices are currently running at a 32.1 percent price premium over national brands, which is higher still than the 28.5 percent price premium private label enjoyed during the 2012 52-week period. And these price increases have not even dented unit sales. In the 52-week period ending October 6, 2013, private label unit sales were still up 4.7 percent vs. national brands’ unit sales increase of 1.1 percent—and that is in spite of private label’s much higher prices.
For an online-only exclusive article highlighting some specific private label categories to watch for 2014, go to www.privatelabelbuyer.com/index.
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