When the food industry begins work each week, its participants tend to assume certain laws of the universe will be operative.
Those include the continued growth of private label and the ongoing scrutiny of brands through SKU optimization programs.
Those seem like safe bets given the clear direction of trends in recent times. Indeed, many now assume these are givens.
That's why new Nielsen Co. data on store brands was surprising. Nielsen found that store-brand penetration in April fell to its lowest level in about a year-and-a-half (read SN's report here). Store-brand unit share of total sales at food, drug and mass outlets declined to just above 21%, a notable drop from almost 23% early in 2010.
Nielsen attributed the decline partly to retailers back-peddling to some degree on overly ambitious SKU reduction programs that had jettisoned brands. Wal-Mart is the best example because that retailer said it would restock some 300 items that were removed.
Does all this signal trouble for private label and a new day for brands? More likely, it represents a temporary shift that will slightly delay, but not halt, private-label growth. That seems to be in line with Nielsen's assessment too, and anyone who says otherwise is defying common sense.
That's because the level of investment in private label continues to jump. In the latest case, Costco revealed plans for new store-label products and underscored its intention to reach 37% penetration in PL sales. Safeway and Supervalu recently announced structural realignments aimed at enhancing their store-brand strategies.
Retailers are also becoming savvier about store-brand Brookshire Grocery Co. outlines how it's accelerating a store-brand bakery program not because it presents a value image, but because it sets the retailer apart.and see private label as a differentiation strategy. In this week's issue,
That's not to say brands are without new opportunities. Retailers are reinstalling some brand SKUs because they face the ire of customers. Other retailers are hoping to differentiate by carrying the brands their competitors have removed. These are all healthy moves to readjust assortments and they hold new promise for certain brands.
However, this doesn't mean private-label momentum will fall off. SKU optimization will still put brands under a microscope. A case in point is a recent SKU rationalization process at Giant Food Stores, Carlisle, Pa. That initiative was directed chiefly at brands, because, as a company executive told SN, private label “performs a specific role in each category's assortment and usually is not affected by SKU optimization.”
That point further underscores that private label is embedded in retailer strategies in a way that ensures its continued momentum.
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