Data / Categories / Private Label vs. National Brands / Research and Awards / Tactics / Dairy / Deli

PLBuyer Index: Days of Moderation and Balance

Rapid growth slows somewhat possibly indicating the beginning of a period of moderation

June 30, 2014
Trans

April’s 2014 4-week period that closed on April 20 give a fairly complete glimpse of how private label faired during the Easter holiday shopping period.

The 52-week rolling period ending April 20, 2014 posted an Index of 112.9, down 0.7 points from last period’s 113.6, but up significantly over the Index from the same 52-week period in 2013, which came in at 97.4. Some overall results:

• Private label share of revenue was up for the month, at 17.5 percent vs. last year’s 17.3 percent. Revenue was up 1.7 percent for national brands, but was up 3.3 percent for private label brands, contributing to the positive Index number.

• Overall, prices increased by 1.3 percent vs. the same period last year, but private label made up a greater share of the increase, as private label prices increased by 2.4 percent vs. national brands’ 1.1 percent. Private label prices were 18.2 percent lower than national brands. In 2013, private label prices were 19.3 percent lower than national brand during the comparable 52-week period.

• Private label units sold were up 0.9 percent vs. the same period last year, while national brand unit sales rose 0.6 percent.

Net impact: Private label brands achieved a trifecta of results: raising prices at a rate that outpaced national brands, while still managing to grow the number of units sold, thus yielding strong revenue growth for the 52-week period ending in April. However, this period’s results were down slightly from the period ending in March, suggesting that this momentum may be beginning to slow.

On a 4-week rolling basis, the results were also strong, posting a 110.6 Index for the period ending in April. This was a decline of 8.5 points from the period ending in March, but is still a significant increase over April 2013’s 101.5 for the equivalent period. Select 4-week period highlights:

• Private label share of revenue increased from 17.0 percent in the 2013 period to 17.2 percent in the current period. Revenue increased 4.5 percent for private label, while revenue overall  improved 3.4 percent.

• Prices increased by 1.1 percent vs. the 4-week period last year, and private label made up a greater share of the increase—private label prices increased by 3.5 percent vs. national brands’ 0.6 percent. Private label prices were 16.1 percent lower than national brands, the second time in a row that we’ve seen it that low since beginning to track the Index. In 2013, private label prices were 18.4 percent lower than national brands during the comparable 4-week period.

• Private label units sold were up 0.9 percent vs. the same period last year, while national brand unit sales were up 2.5 percent.

Net impact: Private label brands were able to increase both prices and units sold, thus driving a significant increase in revenue vs. the year-ago period. However, national brands were able to achieve a much larger unit growth than private label brands, which again suggests that the momentum behind private label’s ability to capture market share while also raising prices might be beginning to slow.

 

Deli Still Stunning on ‘Bad’ Days

Ironically, April was not a good period for Deli, at least compared to the prior two 4-week periods. However, Deli’s bad days still look stellar compared to other categories. In the 52-week period ending in April, Deli hit a 176.5 on the Index, and 166.6 for the comparable 4-week period. However, these were down from significantly from Deli’s March numbers—256.4 for the 52-week Index, and 274.2 for the 4-week Index. What happened?

Deli’s private label revenue growth for the 52-week period hit 13.8 percent, down from March’s 22.4 percent. That still very healthy revenue growth was built through a 6.5 percent increase in price (compared to national brands’ average price increase of 2.8 percent) and a 6.8 percent increase in private label units sold. This yielded a 19.3 percent private label share of revenue, up significantly over the 18.0 percent share of revenue posted in the 52 weeks ending April 2013. Share of units sold increased as well, to 15.2 percent of total units sold, and private label’s price premium over national brands widened to 33.9 percent, over the year-ago period’s 29.2 percent price premium.

The 4-week numbers follow a similar pattern. Deli’s private label revenue increased 15.8 percent over the year-ago period, on top of a 10.0 percent increase in price (by far the largest price increase taken across all categories during the period) and a 5.3 percent increase in units sold. Private label achieved a 19.6 percent share of revenue during the 4-week period, up over the year-ago period’s 18.4 percent share. And the price premium for private label Deli increased to 39.3 percent from 32.2 percent during the year-ago period.

Bottom line for Deli: Private label Deli retains its shining-star status among private label categories, quite possibly helped along by shopping for the Easter holiday. However, as for the overall results, signs of slowing momentum have emerged for Deli, which—depending on retailers’ price strategies for May—could lead to a continued slump in private label share of revenue in the category.

 

New Tactics for Non-Edible?...

Non-Edible is another category that has, overall, done well since the beginning of 2014. And while it has seen continued private label success in the period ending in April, it too shows signs of slowing momentum.

Non-Edible ended the 52-week period that closed in April with an Index of 115.4, down from the March period’s 124.9. On the positive side, Non-Edible private label increased share of revenue from 14.9 percent in the 2013 period to 15.1 percent in 2014, and narrowed the price differential from 36.2 percent lower than national brands in the April 2013 period to 34.7 percent less in the period ending in April 2014. However, share of unit sales were down, to 21.5 percent from 21.6 percent in the 2013 period.

The 4-week results for Non-Edible aren’t much more encouraging. The Index hit 100.1 for the period, which means that private label maintained its share of revenue in the category vs. its year-ago 4-week period ending in April. The price gap closed—private label brands cost 33.8 percent less than national brands instead of 35.3 percent less from the year-ago period—but the improvement came at the cost of unit sales, which fell 3.7 percent for private label, reducing share of units sold to 20.9 percent from 21.3 percent during the year-ago period.

The good news is that this decline wasn’t exclusive to private label—both private label and national brands took something of a hit in the category. Revenue overall was down 0.4 percent in the category, a state shared equally by national brands and private label. But private label’s drop in unit sales was more than double national brands’ decline of 1.4 percent vs. the year-ago period.

Bottom line for Non-Edible: There is still plenty of room to maintain a growing share of revenue for private label in the category, but it may come at the expense of the narrowing price gap between private label and national brands.

 

Dairy Seeks Balance

Despite a recent blip, for the last year, Dairy has been at a constant low in private label performance compared to other categories. Dairy’s 4-week private label index hit 103.5 in the period ending in March—the first time it broke 100 (which means private label Dairy improved its share of revenue) since we began tracking the Index.

But Dairy’s high point in March was apparently not sustainable. Both the 52-week and the 4-week Index numbers have improved: In 2013, the 52-week number was 78.9 vs. today’s 85.9, and the 4-week Index was 93.7 vs. today’s 99.0. However, private label Dairy is just not able to grow share of revenue.

The challenge is the same one that plagued even our winning categories in this month’s analysis. Private label Dairy has achieved price parity with national brands for the 52-week average. This is better than the 2.2 percent lower prices for private label in the 2013 period. The improvement came in part from consistent price increases since the beginning of the year. In the April 4-week period, private label Dairy prices were at a 3.0 percent premium.

But private label’s price increases come at a cost: unit share down to 34.4 percent vs. the 35.3 percent posted in the 2013 rolling 52-week period, and unit share down to 33.6 percent vs. the 34.8 percent posted in the 2013 4-week period ending in April. The unit share decline was almost completely offset by the price increase during the 4-week period, suggesting that retailers may have found the right balance of price and units to drive their revenue and margin objectives. It remains to be seen if that balance can be maintained over time.


About Our Partners
 

About IRI

IRI (www.iriworldwide.com) is a leader in delivering powerful market and shopper information, predictive analysis and the foresight that leads to action. We go beyond the data to ignite extraordinary growth for our clients in the CPG, retail and over-the-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businesses across sales and marketing.

 

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 facing the retail industry ecosystem, and thought leadership and advice on navigating these challenges for specific companies and the industry at large. Collectively, RSR’s analysts have nearly 75 years of experience as retailers, spanning grocery, fashion, specialty and restaurant/hospitality. Our backgrounds encompass store operations and workforce management, supply chain, merchandising, marketing, and IT. We work with retailers and solution providers large and small. Our philosophy is simple: your success in the market is our success. 

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