PF Exclusive: Opportunities in Private Label
According to research from Clear Seas Research in a May 2009 CLEARPulse survey, one third of retailers report current private label penetration levels of 10% or less, while half (53%) report penetration rates of 11%-25%.
Regardless of current levels, nearly all (91%) have plans to expand private label offerings, with a large share (42%) indicating growth goals of 5+ points over the next five years.
Retailers report building customer loyalty as the number-one reason for having a strong private label program. Differentiation (from competitors) and higher margins are also key components driving current practices and targeted growth initiatives.
To accomplish short-term growth goals, retailers expect to focus efforts on center-store items. Natural/organic foods and beverages and refrigerated/frozen meal solutions are also viewed as presenting large short-term growth opportunities. Sustainability (i.e. greener packaging, local sourcing, etc.) is also viewed as an vital element.
With regard to long-term potential, retailers believe that a value-tier-focused + national-brand-equivalent + upscale program (that offers something different from national brands) presents the greatest opportunity for continued growth, post-recession. The biggest challenge faced in the retailer-supplier relationship centers on pricing.
Additionally, retailers are divided on who should bear financial responsibility for private label product/packaging innovation: about half (45%) report a willingness to split costs with suppliers, while the other half (48%) believe suppliers should be solely responsible for such innovations. Most retailers go it alone in terms of planning, procurement and/or promotion of private label products (not using and not planning to use an outside broker for such purposes). Additionally, most retailers use fewer than 10 manufacturers to supply their current private label program, while one-third (34%) report manufacturing some/all of their own private label products.
For more details on this Clear Seas Research CLEARPulse survey, please see the pdf file below.
From the June 8, 2009, Prepared Foods E-dition