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PLBuyer Index: Cautious Moves and More Rollercoaster Rides

HBC posts some incremental progress while private label faces questions about consistency.

August 29, 2014
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Our most-recent 4-week period closed on June 15, providing our first hints into the summer season and private label’s opportunities.

The 52-week rolling period ending June 15, 2014 posted an Index of 102.3, down 10.3 points from last period’s 112.6, and slightly better than the Index from the same 52-week period in 2013, which came in at 98.2.

Private label share of revenue was flat for the month, at 17.5 percent. Revenue was up 1.7 percent for national brands, but was up 1.9 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—private label prices increased by 2.4 percent vs. national brands’ 1.0 percent. Private label prices were 17.9 percent lower than national brands. In 2013, private label prices were 19.0 percent lower than national brands during the comparable 52-week period.

• Private label units sold were down 0.5 percent vs. the same period last year, while national brand unit sales were up 0.6 percent.

Net impact: Private label brands were able to hold onto price increases over national brands, even in an environment of overall rising prices. The price move came with a decrease in unit sales, but not enough to offset the revenue gained by increasing prices. The unit sales decline, however, was what contributed to a flatter Index number vs. May’s results.

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 continued signs of weakness for private label. The 4-week period ending in June posted a 105.5 Index. This was a decline from the 112.9 posted in May, but still an increase over May 2013’s Index of 100.4.

• Private label share of revenue increased from 17.4 percent in the 2013 period, to 17.5 percent in the current period. Revenue increased 2.5 percent for private label, while revenue overall improved by 2.0 percent.

• Prices increased by 2.0 percent vs. the 4-week period last year, and private label made up a greater share of the increase—private label prices increased by 3.7 percent vs. national brands’ 1.6 percent. Private label prices were 17.1 percent lower than national brands. 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 1.2 percent vs. the same period last year, while national brand unit sales were up by 0.2 percent.

Net impact: Rising prices appear to have an impact: 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 (which was down 0.1 percent). However, within that context, private label brands still apparently have room to breathe, with significant price increases that more than offset the decline in unit sales.


HBC’s Cautious Climb

The Health, Beauty and Cosmetics (HBC) category began the year at the bottom of the Index, with a 90.0 Index for the 52-week rolling period ending in January, and a 4-week Index of 86.6. As of the end of June, HBC stood at 92.4 for the 52-week period and 99.5 for the 4-week period.

In 2013, the 4-week Index broke the 100 mark (where private label has achieved parity to the previous period’s results) only once, in February when we began tracking the Index. In 2014, HBC has broken the 100 mark in the 4-week measure in the period ending in May, and came very close to doing so again in June.

According to the 4-week numbers, the positive results appear to come primarily from price increases. HBC is a tough category to achieve price increases for private label, in part because of consumer brand preferences. However, in May, HBC private label was able to increase prices (by 1.6 percent vs. national brands’ 1.4 percent) without a significant decline in unit sales. In fact, in May, private label units fell 0.3 percent vs. national brands’ decline of 0.5 percent.

In June, private label brands appeared to shift tactics, posting a 1.7 percent price increase vs. national brands’ 2.2 percent. The result was a greater increase in units sold, acquired without a significant hit to overall revenue in the category—private label brands grew revenue by 3.1 percent in June vs. 3.2 percent for national brands.

Bottom line for HBC: Private label brands seem to be playing a very closely held hand when it comes to success in HBC. While one month might see less discounting than another, the end result is holding on to revenue growth at a pace that still keeps up with national brands while also improving HBC’s private label price differential.

 

Rocky Roads: Bakery, Non-Edible, Deli

When we first started looking at the IRI data with the intention of creating an Index number, we noticed right away that some categories of goods exhibited a kind of seasonality with regard to private label success. Frozen private label brands, for example, seemed to always do well in the summer and late fall, and then give all the gains back in between.

We’ve noted in our analysis over time that private label brands appear to have taken a significant shift in strategy over the last 8–10 months, focusing more on carefully, cautiously—but also relentlessly—increasing prices and closing the price differential gap with national brands. The result appears to be a new kind of pattern: the rollercoaster.

We first noted the rollercoaster trend last month in Bakery. The Index was way up in March, way down in April, and way up again in May. In June, it’s way down again.

But now this same pattern is emerging for other categories, as well, including: Non-Edible (up in March, down in April, up in May, down in June); Deli (same pattern); and, to a lesser extent, in HBC and even Frozen (though Frozen’s pattern is reversed, with the category down in March, up in April, down in May, and up in June).

Ironically, the “up” times come with big price increases, when you would expect unit sales to fall in response. Instead, private label brands one month achieve huge revenue gains built off of both price and unit sales increases, and then the next month hand it all back through a widening price differential and lower unit sales that combine to bottom out revenue growth. The 4-week results show such large swings that they have an immediate impact on 52-week results, as well, which—theoretically—are smoothed-out by the full-year period.

If the pattern holds, the 4-week results for Bakery, Non-Edible, Deli and HBC will all be up in July, and Frozen’s 4-week results will be down.

 Have private label brands learned to zig when national brands zag? Maybe. But only if private brands can figure out how to hold onto their big gains longer than one 4-week period at a time. 


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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