Data / Categories / Bakery/Baked Goods / Private Label vs. National Brands / Research and Awards / Tactics / Frozen Foods

PLBuyer Index: Big-Picture Private Label Strength

Bakery’s back, Edible and Frozen are slipping, but the big picture’s still rosy for private label.

August 1, 2014
Trans

The May 2014 4-week period closed on May 19, providing early insight into spring and a view into private label’s health as the school year began to come to
a close.

 

Overall Results

The 52-week rolling period ending May 19, 2014 posted an Index of 112.6, down 0.3 points from last period’s 112.9, and up significantly over the Index from the same 52-week period in 2013, which came in at 97.8. Some 52-week highlights include:

• Private label share of revenue was up for the month, at 17.5 percent vs. last year’s 17.3 percent. Revenue was up 1.6 percent for national brands, but was up 3.1 percent for private label, 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—private label prices increased by 2.5 percent vs. national brands’ 1.0 percent. Private label prices were 18.0 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 0.6 percent vs. the same period last year, while national brand unit sales were also up 0.6 percent.

Net impact: Private label 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 May. As prices rise in general, it appears that private label is better able to pass on price increases without having too much impact on units sold.

However, those results reflect an aggregate view of the last 52 weeks. On a 4-week rolling basis, the results were also strong, but with signs of weakness growing. The period ending in May posted a 112.9 Index. This was an improvement over the 110.6 posted in April, as well as a significant increase over May 2013’s Index of 100.3. The 4-week highlights include:

• Private label share of  revenue increased from 17.2 percent in the 2013 period, to 17.4 percent in the current period. Revenue increased 1.8 percent for private label, while revenue overall improved only 0.5 percent.

• Prices increased by 1.3 percent vs. the 4-week period last year, and private label made up a greater share of the increase—private label prices increased by 4.5 percent vs. national brands’ 0.6 percent. Private label prices were 16.5 percent lower than national brands, continuing a wave of new lows in the Index. In 2013, private label prices were 19.6 percent lower than national brands during the comparable 4-week period.

• Private label units sold were down 2.6 percent vs. the same period last year, while national brand unit sales were also down, by 0.4 percent.

Net impact: Rising prices may be beginning to take their toll. While revenue overall was up in the 4-week period, it came solely from price increases to the point that it impacted overall unit growth. However, within that context, private label still apparently had room to breathe, with significant price increases that more than offset the decline in unit sales.


Bakery’s Comeback

The Bakery category has endured a rough ride since the beginning of 2014: 3 of the 5 months to date have seen some of the highest highs in the Index, and the other two months have provided the lowest lows. The period ending in May was definitely a high. In the 52-week period, Bakery hit 186.9 on the Index, and 161.4 for the comparable 4-week period. These are up significantly over the April numbers of 109.2 for the 52-week rolling period and a startling 59.6 in the 4-week period.

The difference was not just price. Overall revenue for the category in the 52-week period was up 6.1 percent. However, the majority of that gain came from private label brands, which grew revenue by an amazing 15.3 percent. And while prices were up for private label, which took a 5.7 percent price increase vs. national brands’ increase of 1.9 percent, shoppers appeared to like what their private label bakeries were selling, increasing unit sales by 9.1 percent vs. national brands’ increase of 0.7 percent.

The 4-week numbers are also strongly in Bakery’s favor. Revenue for private label bakery increased by 9.2 percent vs. national brands’ increase of only 0.4 percent. And while private label did raise prices during the period (by 5.4 percent), national brands decreased their prices by 1.1 percent. The effort did not prevent private label from gaining share of revenue—private label units sold increased 3.6 percent, while national brands increased units sold by 1.5 percent.


Bottom line for Bakery: As long as Bakery private label can come back from a bad month with results like this, everything will work out in the end. However, in the meantime, the road ahead looks more like a rollercoaster.

 

Edible in Trouble

The Edible category seemed to be riding high in the beginning of 2014: Both the 4-week and the 52-week numbers were up over previous periods and trending upward still. However, something changed in April, when the 4-week Index nosedived from 101.4 in March to 72.2 in April, and has stayed low (74.6) in May.

At the aggregated 52-week level, things appear to be OK for private label Edible. Everyone raised prices 0.9 percent, whether private label or national brand, keeping the price differential so that private label average prices that are 29.6 percent lower than national brands. However, even with that favorable price difference, national brands won share of revenue, increasing units sold by 0.7 percent while private label saw a 0.2 percent decline in unit sales. And overall revenue for national brands grew by 1.6 percent, more than twice the rate of private label, which posted 0.7 percent improvement in revenue.

That could potentially all work out OK… National brands’ revenue is growing faster than private label, but at least private label revenue is growing. However, the 4-week numbers reveal a more-discouraging tale. Private label raised prices by 0.2 percent, while national brands cut theirs by 0.4 percent. The net impact for private label Edible was a 2.7 percent decrease in units sold and a 2.6 percent decrease in year-over-year revenue gains during the 4-week period. Apparently, a small change in price went a really long way—in the wrong direction for private label.

 

Frozen Lets It Go

Except for the summer months in 2013, the Frozen category did very well for private label, growing share of revenue overall and maintaining near-parity on prices, one of the few categories to do so. But Frozen appears to have given all of those gains back. The 52-week Index sits at 92.1 for the period ending in May (vs. a year ago at 121.5). This result was brought down by the 4-week number’s fall to 81.2, a new low for Frozen since we started tracking the Index.

The whole category appears challenged. For the 52-week period, the only thing brands of all stripes—private label or national brand—managed to achieve was a growth in prices. But that growth came with a negative impact on both revenue and units sold. In the end, overall revenue fell 0.2 percent, with private label bearing the brunt of it, yielding a 1.0 percent decrease in revenue from the Frozen category.

On a 4-week basis, it looks even worse. Total store revenue for the period fell 3.2 percent, with private label taking a 5.0 percent hit. Prices were up, with private label again taking the lead, taking a 2.7 percent price increase vs. national brands’ 0.6 percent increase. But the reaction in terms of unit sales was fairly brutal—private label unit sales were down 7.5 percent, more than twice the hit national brands took with a 3.4 percent decrease in unit sales.

 Last year, Frozen private label had entered the summer with steady growth in share of revenue, which it then gave back over July and August. This year, Frozen does not have that luxury, which may well constrain what private label is able to do with the Frozen category during the hottest months of the year. 


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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