Debate over the future growth path of private label has been heated. Eric Sher, research associate for investment firm Bernstein, told Food Navigator last month that the private label boom has already peaked.
So are brands ready to fight back and take market share from private label? Once consumers have seen back of the recession, will they use the extra more money in their pockets to switch back to their favorite food brands?
Long-term growth potential
A new report from Information Resources (IRI) suggests that on the contrary, private label is here to stay and the industry can expect continued growth.
The argument behind this conclusion is that the vast majority of people believe private label goods are of high quality but only a minority has so far turned their positive feelings into purchases. This leaves a large potential market of private label consumers.
Survey results
IRI conducted a survey of 1,500 consumers and found that 78 per cent of them believe private label products are typically of a high quality. The researchers said consumers in both high and low income categories had a high opinion of private label.
And yet dollar and unit share of private label is still below 25 percent, according to IRI innovation and consulting president Thom Blischok.
Sean Seitzinger, senior VP of the division, added: “Four out of five shoppers are now ‘sold’ on private label quality indicating that product marketing during the current recession is successfully expanding the positive reputation and reach of these products.”
IRI said that its research suggests price is less important than quality in purchasing decisions, so given the good quality reputation of private label, manufacturers should easily be able to grow private label sales.
But in order to take advantage of the “enormous opportunities” in private label, companies have to target their resources effectively.
IRI researcher Shelley Hughes told Food Navigator USA that there are a number of areas within food that show high promise for private label development. The products picked out as having the greatest potential were margarine / spreads, salad dressings, frozen pizza, breakfast meats, refrigerated juices/drinks, mayonnaise, canned seafood, cookies and peanut butter.