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Store Brand 'Stickiness' Varies by Category

May 24, 2010
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Will consumers stick with store brands after the economic recovery takes hold? According to a new report from Stamford, Conn.-based Consumer Edge Research, it depends on the category.

The economic difficulties brought on by the Great Recession convinced many consumers to switch to private labels in an effort to stretch their grocery dollars further. But will they stick with store brands after the recovery takes hold? According to a new report from Stamford, Conn.-based Consumer Edge Research, it depends on the category.

Based in part on an online survey of more than 2,500 consumers, the report combines private label penetration in a given category with the percentage of consumers "very satisfied" with recent private label purchases in that category to determine store brand "stickiness" post-recession, i.e. the likelihood consumers will stay with the private label alternative in that particular category.

According to the report, the private label categories consumers are most likely to continue to shop include milk (not organic), cooking oil, bleach, paper napkins, spices, liquid hand soap, canned vegetables, paper towels, cheese and trash bags. The rest of the top 20 includes sliced/packaged bread, canned tomato products, jams/jellies, cooking storage bags, snack nuts, ketchup and condiments, cough and cold medicine, canned/jarred fruit, dry seasoning mixes and facial tissue.

However, the report noted, several categories that posted strong store brand stickiness numbers due mostly to their high private label penetration may see some pullback post-recession, thanks to less-than-stellar customer satisfaction ratings.

"Trash bags, batteries and disposable razors all have high private label household penetration but low satisfaction, indicating likely consumer trade-up back to brands as the economy recovers," it said.

On the flip side, the report continued, categories with only moderate private label penetration but high consumer satisfaction - other (non-orange) juice, crackers, ice cream, orange juice and toothbrushes - bear watching. According to the report, the 10 "least sticky" private label categories include smokeless tobacco, energy drinks, wine, sports drinks, canned/bottled tea, spirits/liquor, soy milk, beer, adult incontinence, and contraceptives. Other categories relatively immune to post-recession store brand stickiness include cosmetics, diapers, cigarettes, lipstick, tampons, flavored bottled water, frozen dinners, organic milk, chewing gum and cat food.

By examining portfolio mix by category, the report also rated the private label stickiness risk of 75 key CPG companies. Those considered most at risk were Dean Foods, Saputo Cheese USA, McCormick & Co., Pactiv Corp., Flowers Foods LLC, Jarden Corp., Grupo Bimbo, Newell Rubbermaid, Dole Foods Co. and Lancaster Colony Corp.

"Food and household products companies were among those with the highest risk for private label stickiness," the report said. "Energy drink, tobacco, candy, wine and spirits companies had the lowest risk."

Despite the report's focus on private label's performance during and after the recession, Consumer Edge Research CEO Bill Pecoriello told PL Buyer the economy is not the only driver of store brands' recent success, which he predicted will continue well into the future.

"The economy is only one factor," he explained. "If we look back five or ten years ago, there's been a long-term upward trend in household penetration for private label across the CPG space. Retailers' investment in upgraded product quality for their private label offerings along with additional merchandising and space are also contributing [to store brand growth]."

He added, "The recession drove more households to try private label, and for those categories where the satisfaction is high, consumers are saying 'I like the performance and don't need to rush back to the branded offering I was using before.'... The key is getting them to continue to try private label offerings post-recession."

For more information, visit www.consumeredgeresearch.com. - Denise Leathers

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