Consumers Less Enthused About Private Label

The number of consumers using private label food and beverage products continues to rise, but our latest report, The Evolution of Private Label — Does Brand Name Really Matter?, shows Americans are losing their enthusiasm for these value-oriented options.

Well before the start of the recession consumers were turning more toward private label food and beverage products and expressing high levels of satisfaction with the products. The report shows private label’s share of household servings was 18 percent in 2000. That percentage has steadily risen each year since then, and it reached 27 percent in 2011. The enduring economic situation and higher grocery prices certainly have played a role in this rise as consumers constantly try to manage their grocery expenditures.

But are consumers hoping to return to the name brands they have known since their childhood? In 2009, 34 percent of adults said they intended to purchase more private label versus year ago, but that has dropped to less than a quarter of adults in 2012. Perhaps being a less-expensive alternative is no longer sufficient, as adults are also giving private label food products lower satisfaction scores. For example, when asked whether private label foods met their needs, 32 percent of adults purchasing private label said the products did an excellent job of meeting their needs in 2009. That dipped to 24 percent in 2012.

Another factor helping name brand manufacturers is their increased use of social media to communicate with consumers. Name brand manufacturers seem to be garnering more loyalty by harnessing the power of the Internet and mobile technology. Consumers who frequently use social media and apps on their smartphones claim to be more loyal to brand-name items versus their private label counterparts. This interaction appears to be developing relationships with consumers since they are opting for the name brands, rather than generic items at lower prices.

Not all categories are treated the same by consumers when it comes to private label. While we are seeing more private label end dishes being served, consumers’ loyalty to private label is still strongest in categories that are mostly used as ingredients. Flour and butter top the list of private label-loyal categories; family members and/or guests are not likely to know which brand was used in the end product. On the flip side, categories where we notice a stronger loyalty to name brands are very likely to display the brand to the user. Examples of these categories are frozen dinners / entrees, yogurt, and carbonated soft drinks.

This does not mean private label products have failed to make progress over the last decade, which should capture the attention of brand name manufacturers and retailers alike. Two-thirds of adults say store brands’ quality is much better today than it was five years ago. The question is, however, if food inflation declines and at the same time the economy improves, will consumers return to the name brands they know and trust? That could become a reality if retailers do not respond to declining satisfaction and if name brand manufacturers continue their loyalty tactics.

Private Label Share Total Household Servings of Foods and Beverages (excluding milk)

Source: The NPD Group/National Eating Trends®, years ending November

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