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PLBuyer Index

Our Seasonal Non-Edible Rollercoaster

Insight into pricing strategies helps make sense of the seasonal swings we’re seeing in Non-Edible store brand products.

January 2, 2014
Trans

The total store PLBuyer Index is at 102.2 for the 52 weeks ending November 3, 2013. Private label share of revenue was up slightly to 17.5 percent, vs. 17.4

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PLBuyer Index chart January 2014

percent for 2012. Revenue was up 1.8 percent for national brands, but was up 2.1 percent for private label brands. Overall, prices increased by 1.5 percent vs. the same period last year, but private label made up a greater share of the increase; private label prices increased by 2.0 percent vs. 1.4 percent for national brands. Overall, private label prices were 18.8 percent lower than national brands. In 2012, private label prices were 19.3 percent lower than national brands during the same 52-week period. However, private label units sold were down 0.3 percent vs. the same period last year, while national brand unit sales rose 0.5 percent.

Net impact: Both private label and national brands raised prices during the period, but private label brands were able to capture a greater price increase than national brands. Private label share of units did fall as a result, but not by nearly enough to offset revenue gains over the same period last year. Share of revenue for private label grew slightly, maintaining the PLBuyer Index’s positive trajectory as it moved from 102.7 to 102.2 in the current rolling period.

Private label revenue improvements continued their uneven gains across categories. The biggest private label category revenue mover was Deli, which saw private label revenue growth greater than 9 percent vs. the prior 52-week period. Bakery and Non-Edible categories also saw private label revenue growth that outstripped national brands during the period.

The biggest private label category unit movers were Bakery and Deli. Private label Deli grew unit sales during the period at a faster rate than national brands, and private label Bakery grew unit sales while overall unit sales fell in the category.

Private label made the biggest price increases in Non-Edible, Deli, and HBC. These three categories saw unit prices rise by $0.08 or more vs. the period last year, and in all cases were larger price increases than those brought by national brands.

 

Seasonal Non-Edible Swings

Understanding the seasonality inherent in the PLBuyer Index has been one of the larger challenges of providing and interpreting the swings in fortune, both at the total store level and within categories. The analysis is designed to try to eliminate as much seasonality as possible—for example, we compare 52-week rolling periods, so that we are looking at an entire year for the top Index number. And when looking at the 4-week periods, where the variability is much greater, we compare the periods year over year, instead of looking from period to period.

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PLBuyer Index chart January 2014

Averages and aggregations can hide a lot of variability underneath, which is why we provide monthly spotlights into specific categories. This month, we found that both Bakery and Non-Edible took big dives in their 4-week index numbers. However, given that the data runs through November 3, 2013, it didn’t seem fair to take a deeper look at Bakery until after the Thanksgiving holiday numbers were in. So this month’s analysis focuses on Non-Edible.

Non-Edible, as measured for the PLBuyer Index, consists of cleaning items, including air fresheners, bleach, dish detergent, household cleaners and laundry cleaners, diapers and tobacco, foils and wraps, trash bags, candles, charcoal, and paper and plastic products like cups, plates, facial tissue, paper napkins, paper towels, and bathroom tissue.

On the surface, the Non-Edible category has done fairly well. In terms of 52-week rolling numbers, it is the third-best-performing category that we track, behind Deli and Bakery. However, underneath those numbers is a 4-week year-over-year (YOY) comparison that appears to take massive rollercoaster-like swings every six months or so.

For a category that consists of some fairly inelastic items, what causes these big swings in private label performance?

Even for diapers and tobacco, price still apparently plays a big role. The Non-Edible category has the biggest price differential of all of the categories we track, with private label prices averaging 35.4 percent below national brand prices in the 4-week period ending November 3, 2013.

During the 4-week period ending in June, the gap between private label and national brand prices grew to 37.5 percent for both 2012 and 2013. In 2012, the gap stayed fairly wide in the five periods that followed, though share of units stayed nearly flat from the period ending in July through the one ending in September. And without any big movements relative to national brand prices, private label share of units took a big jump in the period ending in November 2012.

Did private label brands in the Non-Edible category see an opportunity for 2013? The first half of the year tracks fairly closely to the pattern seen in 2012. However, after June 2013, all bets were off. Private label brands took aggressive steps to narrow the price difference from national brands, and it was only in the period ending in October that the price difference—the closest it’s been to national brands since we started tracking the PLBuyer Index—appeared to result in a dip in sales. However, share of units was still better than in that period in 2012, and so Non-Edible private label scored the highest PLBuyer Index number for the 4-week period that we’ve seen in the category, at 134.5.

Private label brands widened the price difference in the current period ending in November, but it did not drive the same share of units as in 2012, which resulted in Non-Edible private label giving up some share of revenue relative to the 4-week period in 2012.

But the price story doesn’t end there. Looking at the actual average unit prices for the Non-Edible category, it appears that private label brands have been able to sustain price increases in the category that national brands have not.

In the periods ending in March and October this year, national brand average prices were within fractions of pennies of each other ($4.79 in March, $4.71 in October). Private label brands, however, with the exception of the period ending in July, have maintained at least a $0.05 price premium in 2013 vs. 2012. And their big move came in the period ending in August, when, instead of cutting prices to match the typical average price drop that national brands took in both 2012 and 2013, private label brands raised prices and kept them high, all the way until they started to give back a little on price in the latest period.

Keep in mind that we’re still talking about a situation where national brands commanded an average price of $4.76 in the period ending in November, vs. $3.08 for private label brands—a difference of $1.68. However, the pricing activity we’ve seen in Non-Edible is consistent with the activity we’ve seen in other categories, where private label brands have carefully raised prices—or at least not discounted them when they historically have—all while trying to avoid a drop-off in unit sales. For Non-Edible, that strategy has worked remarkably well in the second half of the year, up until the latest 4-week period.

With Thanksgiving sales not yet fully accounted for in the results, and an entire December month of holiday celebrations to drive purchases of both cleaning supplies and paper products, the biggest questions for the category remain. Private label brands have been playing something of a game of chicken with consumers—narrowing the gap between private label and national brand prices, and reaping the rewards in terms of share of revenue growth, as unit sales have not declined.

 Will retailers be the first to blink, now that private label brands have experienced their first contraction in Non-Edible share of revenue since the summer? Or will they hold strong on price through the holiday season—and still be able to reap the rewards of revenue growth without losing too much in share of units? Stay tuned!  

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