2004 TOUGH YEAR FOR NAT'L, STORE BRANDS

Lucia Moses

NEW YORK -- Supermarket store brands maintained their share of dollar sales but lost unit share from 2003 to 2004. Private label performed better than national brands in dollar sales, but in supermarkets and combined sales channels alike, unit sales declined faster than national-brand sales.

The findings come from the soon-to-be distributed Private Label Manufacturers Association's 2005 Private Label Yearbook, a compilation of data from U.S. food, drug and mass channels, excluding Wal-Mart Stores, from Information Resources Inc., Chicago.

The dollar sales increase helped supermarket store brands maintain their dollar share at 16.1%, but unit share declined slightly, to 20.5% from 20.8% in 2003. In all channels, store brands gained in unit share, to 20.1% from 19.7%, with dollar share up slightly, to 15.2% from 15.1%.

The unit declines reflect the pressure facing retailers, as shoppers of both national and store brands shift spending to alternate channels, representatives of brand and private-label trade groups agreed.

"I'm not disappointed by the private-label numbers," said Brian Sharoff, PLMA president. "Everybody in the store is taking their share of the hit. Consumers are buying fewer units, paying more, and when all is said and done, dollar share hasn't changed."

The numbers are "a reflection of the overall environment in the channel today, which is very challenging," said Mark Baum, executive vice president, Grocery Manufacturers of America, Washington.

Sharoff attributed the smaller decline in national brands' unit sales to manufacturer promotions. "National brands have been more aggressive in price, promotion, and been able to maintain units."

Baum said the discrepancy has more to do with national brands' success in packaging and product reformulations that address consumer demand. "What you've seen among brands is much more leadership and innovation," he said. Whether due to poor execution or consumer preference for national brands, supermarkets have had difficulty increasing the percentage of the mix devoted to private label, he said.

Across supermarket departments, store brands' unit share slipped in six of eight departments, with only nonedibles and general merchandise posting gains.

Store brands' share decline came even as progressive retailers have been energizing their private-label programs by introducing upper-tier and specialty lines.

"This aggregates the good and the bad," Sharoff said of the data. "Within these statistics are retailers whose private-label dollar share may be increasing 5%."

The best story for private label was in the drug channel, where, thanks possibly to consolidation, the yearbook speculated, private label grew 3.5% in dollar and 4% in unit sales -- with health and beauty care, edibles and general merchandise all posting unit gains. Store brands' overall unit share in drug stores advanced to 13.1% from 12.7%. Among the national brands, dollar sales rose 0.4% while unit sales were flat. Supermarkets' private-label performance was uneven across the United States. Across the eight regions IRI tracks, the Plains was the only gainer for store brands, which Sharoff said could reflect the relative weakness of big supermarket chains. In the West and Northeast, the supermarket strike and general channel weakness, respectively, could have hurt private label, Sharoff said.

Private label's share has increased slightly since 2000, when unit share stood at 20.1%. The yearbook for the first time this year reports sales figures that reflect discounts taken at the register. Since 2002, when IRI began reporting sales this way, private label's dollar share has been essentially flat.

The year started on a hopeful note for private label. In the 12 weeks ended April 17, private-label unit share sales in combined channels grew 1.1% vs. a 1.3% decline for the brands. Dollar sales rose 2.3% for store brands, 1.4% for national brands.

Among other findings in the 2005 report:

- Store brands gained share in three of the top five edible Center Store categories by private-label share of unit volume. Categories posting gains were carbonated beverages, bottled water and frozen plain vegetables; declining were tomato products and canned/bottled fruit.

- In Center Store, the biggest percentage unit gains by private label were in categories where store brands' share is less than 6% but recent activity has been strong. They were household cleaner cloths, miscellaneous snacks, baby food, wine and aseptic juices, where unit sales gains ranged from 0.2% to 2.2%.

Dollar Volume in Supermarkets

2004 Sales; Year-Ago Change

Total Channel: $251.1 billion; 0.7%

Private Label: $40.5 billion; 0.9%

National Brands: $210.6 billion; 0.6%

Unit Volume in Supermarkets

2004 Sales; Year-Ago Change

Total Channel: $118.7 billion; -2.2%

Private Label: $24.4 billion; -3.5%

National Brands: $94.4 billion; -1.9%

Source: Information Resources Inc., via Private Label Manufacturers Association