Bakery/Baked Goods / Categories / Private Label vs. National Brands / Research and Awards / Deli / Tactics

Private Label Bakery and Deli Shine

We see a strong start for the first quarter of 2014 - particularly for Bakery and Deli.

May 29, 2014
Trans

The first quarter 2014 has come to a close, and the results are in for private label: a strong start to the year. The 52-week rolling period ending March 23, 2014 posted an Index of 113.6, up 0.3 points from last period’s 113.3, and up significantly over the 102.4 posted at the end of December.

Private label share of revenue was up for the month, at 17.5 percent vs. last year’s 17.3 percent. Revenue was up 1.5 percent for national brands, but was up 3.1 percent for private label, contributing to the positive Index number.

Prices increased by 1.3 percent vs. the same period last year, but private label made up a greater share of the increase—private label prices increased by 2.3 percent vs. national brands’ 1.2 percent. Private label prices were 18.4 percent lower than national brands. In 2013, private label prices were 19.3 percent lower than national brands during the comparable 52-week period.

Private label units sold were up 0.8 percent vs. the same period last year, while national brand unit sales rose 0.3 percent.

Net impact: Private label achieved a trifecta of results: raising prices at a rate that outpaced national brands, while still managing a growth in the number of units sold, thus yielding strong revenue growth for the 52-week period ending in March.

On a 4-week rolling basis, the results were even more impressive, posting a 119.1 Index for the period ending in March, which built on February’s 113.8, a significant improvement over January’s 98.5.

Private label share of revenue increased from 17.1 percent in the 2013 period, to 17.4 percent in the current period. Revenue increased 2.8 percent for private label, while revenue overall improved only 0.8 percent.

Prices increased by 1.7 percent vs. the 4-week period last year, and private label made up a greater share of the increase—private label prices increased by 3.8 percent vs. national brands’ 1.2 percent. Private label prices were 16.8 percent lower than national brands, the lowest differential we’ve seen since we started tracking the Index over a year ago. In 2013, private label prices were 18.8 percent lower than national brands during the comparable 4-week period.

Private label units sold were down 1.0 percent vs. the same period last year, while national brands were down 0.8 percent.

Net impact: Over the 4-week period, private label brands were not able to achieve the trifecta of results seen in the 52-week numbers, but they were able to achieve significant price and revenue gains, with only a slight drop in unit sales.

 

Bakery’s Big Moves

Private label within the Bakery category staged an impressive comeback during the first quarter of 2014, moving from a relative low of 126.2 on the 52-week rolling PLBuyer Index (which still implies strong growth in private label share of revenue in the category) up to year-over-year highs of 204.9 in the period ending in February and 199.0 in March.

Bakery private label share of revenue improved to 29.7 percent in the 52-week period ending in March, from 2013’s 27.0 percent share. Revenue improved 9.9 percent—one of the biggest gains we’ve seen in any category since tracking the Index.

During the last three 4-week periods, there have been some interesting moves by private label in the category. For the last three periods, private label has been raising prices, while national brands have been cutting prices. However, private label brands have only become more aggressive as time has progressed this year. In January, they raised prices 1.2 percent. In February, they raised prices 6.3 percent, and in March continued their aggressive stance, raising prices again by 7.6 percent. In the four weeks ending in March, the price differential has shrunk significantly. In March 2013, private label was priced 26.7 percent lower than national brands. In March 2014, that fell 20.2 percent lower.

Unit growth has suffered slightly as a result, but not nearly enough to offset the revenue gains from price increases. In March 2013, private label’s 4-week share of units was 33.2 percent. In March 2014, it was 32.9 percent. And unit sales for private label were actually up over the same period last year, with a 3.9 percent gain. That just wasn’t as much as national brands’ unit gains of 5.1 percent. The net result for Bakery was two out of three 4-week periods of significant revenue growth—13.1 percent increase in revenue during February 2014 vs. February 2013, and 11.7 percent revenue growth during March 2014 vs. the year-ago period.

Bottom line for Bakery: After languishing in December and January, Bakery is back, posting a 154.2 Index for the 4 weeks in March, and brining the 52-week Index up to 199.0.

 

Astounding Deli

Private label in Deli was already setting a gangbuster pace for 2014, but in February and March their results accelerated even beyond those high-water marks.

Deli achieved a whopping 27.0 percent revenue growth in the 4 weeks ending in March, which was in addition to 29.5 percent revenue growth in the 4 weeks ending in February. Share of revenue improved from 17.0 percent in March 2013, to 20.0 percent in March 2014, which yielded a 4-week Index of 274.2.

This revenue growth was not bought by price cuts. In fact, private label Deli continued to raise prices—by 5.7 percent in the 4 weeks ending in January, 6.8 percent in February, and another 6.9 percent in March. By the end of the 4 weeks in March, private label Deli enjoyed a 35.7 percent price premium over national brands—an average of $4.66 vs. national brands’ $3.43.

Unit sales of private label soared, growing 21.3 percent year-over-year in February and 18.8 percent in March. National brands grew a tepid 1.6 percent and 1.7 percent, respectively.

 Bottom line for Deli: Private label Deli brands appear to have achieved the kind of desirability that every brand hungers for—the ability to command price premiums without impacting units sold. The net result is some astounding revenue growth.  


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About IRI
IRI (www.iriworldwide.com) delivers powerful market and shopper information, predictive analysis and the foresight that leads to action.

About Retail Systems Research
Retail Systems Research (www.retailsystemsresearch.com) is the only research company run by retailers for the retail industry. RSR provides insight into business and technology challenges.

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