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Private Label growth, which had slowed throughout the pandemic, is poised to make a comeback in 2023, according to a Numerator study published in January: Private Label Trends: Top Brands, Consumer Sentiments & More. I Numerator
A few key highlights from the Numerator Report:
- Private Label now accounts for 18% of dollar, and nearly 22% of unit sales across CPG categories, and while Private Label growth slowed through the COVID years, it is expected to accelerate in 2023.
- Private Label is growing across all income groups, although reasons for purchasing PL products vary. Lower income groups are more likely to say they save money, while higher income groups believe that the quality has improved over time.
- Private Label share and growth is high among staple food items like Canned Vegetables and Cheese, as well as household items where we’ve seen dramatic price increases through COVID, like bath tissue.
- Traditionally low Private Label categories like laundry detergent, dog food, diapers, and formula saw some of the highest Private Label growth rates.
- The top Private Label brands (based on HH Penetration) are owned by Walmart, but Amazon's Basics brand is the fastest growing.
Navigating promotional strategies for high-growth Private Label brands
It is tempting to increase promotional depth of discount as we see Private Label infringing on market share, which may be the right tactic – but it may not be. It's important to understand your brand’s interaction with Private Label first. This can be done by utilizing some simple household panel and pricing analytics to answer the following questions:
- To what extent are my consumers switching between my brand and Private Label?
- Do our demographic profiles overlap? With which consumer segments?
- To what extent do we have cross-elasticity with Private Label? On an everyday pricing basis? Does this change with promotions?
If you find that consumers are not trading between your brand and Private Label, it is important to stay the course, balancing your trade promotion strategy with maintaining your brand equity. Too many, or promotions that are too deep, can damage your brand equity – cheapen your brand with the consumer and train them to only purchase when there is a sale.
Understand your brand’s consumer value equation
What are the benefits the consumer perceives relative to price – for your brand vs. store brands. Functional benefits are important but be sure to consider emotional benefits as well as the importance of popular social impacts such as sustainability and corporate responsibility. If you can’t express your consumer value equation on all elements, it might be time for some research.
A good place to start is importance/performance research – understand the elements that drive purchase in your category and how your brand, and all competitors, are perceived relative to those important attributes. Evolve your brand strategy around important attributes where you have strength or differentiation.
This type of research could spark new thinking to shore up ways to insulate your brand against Private Label encroachment. Are there innovations in product and packaging that should be tested? Is your messaging creating the right differentiation in the consumer’s mind? Challenge and test your assumptions on brand strength and differentiation.
Build brand equity through trade promotions and in-store demos
Packaged goods brands can use trade promotions like price reductions, in-store displays, and special packaging to increase their visibility and make their products more attractive to customers. However, promotions don’t have to be brand equity diluters. The best way to ensure your trade budget works for brand equity is to work with retail partners to find the programs they care about, that also fit in with your brand message.
Another equity builder are in-store demos, sampling products to would-be consumers to build trial. While most trial-building programs are expensive, partnering with a retailer in this way also serves the dual purpose of strengthening both the customer relationship and consumer relationship.
Here’s an example that pulls these concepts together:
- A canned goods manufacturer has seen a rise in Private Label, as a key customer has been introducing new store brand items with premium quality. Brand research has shown that top attributes that category consumers care about are value, quality and among young families - good corporate citizenship. The brand scores above average on quality, but below average on value and citizenship.
- The canned goods manufacturer partnered with this retailer on an event where they donated a can of goods for every can purchased across the chain. During the event, in-store demos sampling the product with signage about the donation occurred in key stores. The event ran for 4-weeks and was supported by in-store signage and through the retailer’s App.
- Post-event evaluation illustrated an increase in sales during and after the event with little impact on Private Labels sales. Category volume increased, while competitive branded sales did decline somewhat. The event will be repeated annually, and the brand is enjoying growth with a key consumer base in this market.
By creating an experience for consumers around solving hunger in the community, the brand was able to build equity with young families in the area. And unlike short-term price reductions, this equity will serve them well long after the promotion has ended.
The role of revenue growth management software in Private Label competition
If you find consumers DO switch between your brand and Private Label, that price is a driver of switching and that your value proposition makes it difficult to differentiate, it will be vital to MAXIMIZE both your price gaps and promoted strategy relative to your revenue, sales and profit goals.
Trying new strategies requires the ability to properly evaluate them. Revenue Growth Management software with a strong trade promotion management platform and optimization capabilities should provide you with the ability to harmonize your data sources, create the right models and give you the software to evaluate trade events, run scenarios, war-game and make decisions quickly.
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