Private Label Buyer
PLBuyer Index

2014's Private Label Early Winners and Losers

Private label and national brands raised prices, with private label showing a greater relative increase - and share of units did not fall.

April 1, 2014
PLBuyer Index April 2014 chart

As we settle into 2014, we turn the corner on the first complete year of the PLBuyer Index; our first reported period ended back in February 24, 2013. This month’s Index report is based on the period ending January 26, 2014.

But before we reset all the year-to-date counters and start a new row on all the charts, we wanted to take a more in-depth look at the first full month of the year, one that incorporates some New Year’s Eve spending and some of the preparations for the biggest snacking day of the year, the Super Bowl.

 

Overall Results

First, some overall results for the month. The 52-week rolling period ending January 26, 2014 posted a PLBuyer Index of 102.0, down 0.4 points from last period’s 102.4. Highlights within the data include:

• Private label share of revenue was up, at 17.5 percent vs. last year’s 17.4 percent. Revenue was up 1.6 percent for national brands, but was up 1.9 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 1.8 percent vs. national brands’ 1.1 percent. Private label prices were 18.6 percent lower than national brands. In 2013, private label prices were 19.2 percent lower than national brands during the comparable 52-week period.

• Private label units sold were up 0.1 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 yet again able to capture a greater relative price increase than national brands. Private label share of units did not fall as a result, helped along by the continued price gap between national brands and private label. Share of revenue for private label grew slightly, resulting in an Index of 102.00, vs. 102.04 in the period ending December 29, 2013.

On a 4-week rolling basis, private label brands did not fare so well, posting an Index number of 98.5, which means private label brands lost share to national brands in the period. Other 4-week rolling data notes:

• Private label share of revenue held steady vs. last year’s 4-week period at the surface level, at 17.9 percent. However, some differences hid in the rounding error. Revenue was up 1.5 percent for national brands, but only up 1.3 percent for private label brands, contributing to the lost ground in the Index.

• Overall, 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 1.7 percent vs. national brands’ 0.9 percent. Private label prices were 18.4 percent lower than national brands. In 2013, private label prices were 19.1 percent lower than national brands during the comparable 4-week period.

• Private label units sold were down 0.4 percent vs. the same period last year, while national brand unit sales rose 0.6 percent.

Net impact: Private label brands appear poised to continue playing the long game—balancing very tightly on share of revenue by continuing to raise prices relative to national brands while giving ground slightly on units sold.

 

Big Moves for Frozen

The private label Frozen category made big revenue moves during the 4-week period ending January 26, 2014, but overall the category did not. Private label revenue improved 2.9 percent while national brand revenue improved only 0.4 percent. This helped private label achieve 19.6 percent share of revenue, an improvement over the year-ago period’s 19.3 percent share.

Everybody raised prices during the 4-week period, but private label raised prices 1.4 percent, from an average of $3.31 during the 4 weeks ending in 2013, to $3.36 during the 4 weeks ending in 2014. That put private label prices at barely 0.1 percent less than national brands, which were priced an average of $3.39.

Unit growth favored private label as a result. Private label unit sales grew 1.2 percent, while unit sales of national brands fell0.8 percent, which translated in 0.4 percent contraction in overall unit sales in the category.

Bottom line for Frozen: the 4-week PLBuyer Index number for the Frozen category stands at 118.0, and the 52-week rolling index came in at 105.9, which puts Frozen private label in a strong position as we kick off 2014.

 

Deli’s Double-Digit Growth

Private label apparently can do no wrong in the Deli category. As this 4-week period encompassed both last-minute shopping for New Years Eve and some early shopping for the Super Bowl, Deli was already poised to do well this period. However, the results were even better than expected.

Deli is a small category for both overall category sales, as well as private label, but it continues to shine, achieving 16.4 percent revenue growth for private label, while national brands achieved 6.4 percent revenue growth. This translated into an increase in share of revenue for private label from 18.9 percent during the 2013 period to 20.3 percent in the current 4-week period.

What’s most interesting about this double-digit revenue growth is that it was achieved by price increases that were 150 percent greater than the price increases taken by national brands—private label Deli raised prices $0.24 over the year-ago period, while national brands raised prices $0.16. That puts private label at a 31.8 percent price premiumover national brands—$4.51 average price to national brands’ average of $3.60.

Was unit growth negatively impacted as a result? No. Unit sales of private label soared, growing 10.1 percent during the period, while national brands achieved 2.5 percent unit growth.

Bottom line for Deli: Not many categories can achieve price increases and unit growth that outpace the competition, on the back of a 30 percent price premium over said competition. Deli has been achieving blockbuster growth for private label. If there are lessons that other categories can learn from private label Deli’s success, then they should learn them quickly.


Half Baked

Overall, the Bakery category achieved revenue growth during the 4-week period, but private label Bakery did not. While Bakery’s 52-week Index sits at a very healthy 126.2, for the last 8 weeks, the 4-week Index number has been in the low 70s—73.1 in the current period.

On average, private label raised prices 1.2 percent in Bakery while on average national brands cut prices by 0.2 percent. However, private label is at a price disadvantage in the category, averaging $2.02 to national brands’ average price of $2.42, a 23.9 percent negative price differential.

And yet even with this price difference, private label Bakery units declined 0.4 percent while national brand unit sales grew 4.9 percent.

Bottom line for Bakery: Whatever Deli is doing right in private label, Bakery appears to be doing wrong. Neither category is large—Deli does approximately $371 million in private label sales against $1.8 billion overall, and Bakery does $439 million in private label vs. $1.6 billion overall. By contrast, Dairy and Edible are over $2 billion categories for private label. But both Bakery and Deli occupy strategic, and profitable, parts of the grocery store. Some of Deli’s magic may well be needed in the Bakery department.

 

A Tale of Two Cities

Health, Beauty & Cosmetics (HBC), and General Merchandise (GM) both saw big revenue declines for private label. In HBC’s case, revenue declined all around—for private label and national brands alike. For GM, revenue declined for private label, but not for national brands.

The differences present a tale of two cities. HBC private label tried to raise prices in lockstep with national brands—a 2.4 percent increase over the year-ago period, which maintained private label’s negative price differential of 14.9 percent. However, as a result of this lockstep increase in price, private label unit sales fell much harder than national brand unit sales—a decrease of 4.7 percent for private label vs. a 3.1 percent decline for national brands.

GM private label took a different approach. National brands raised prices in GM by 3.4 percent, while private label decreased prices by 3.0 percent. This increased the price differential between private label and national brands to -28.4 percent. As a result, GM private label was able to hold on to some unit growth by the skin of its teeth—growing unit sales by 0.2 percent while national brands declined 3.1 percent. Unfortunately, the unit sales growth was not enough to offset the price cut that private label took, and both revenue growth and share of revenue declined during the 4-week period.

Bottom line for HBC and GM: Both of these categories continue to struggle to raise prices without sacrificing share of units, and sometimes that translates into a loss of revenue share. HBC’s 52-week Index sits at 90.0, and the current 4-week period Index number came in at 86.6—both numbers an indicator that private label is losing ground to national brands.

 GM’s 52-week number still reflects healthy growth in share of revenue, sitting at 118.9. But for the last 5 months, the 4-week number has sat below 100—sometimes well below 100, which means private label is giving up share of revenue in the category. That would all be fine if private label was able to sustain price increases in the category, but the price differential currently stands at its widest since we’ve begun tracking the Index, which implies that retailers have yet to figure out how to get those price improvements to stick.  


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