- According to the 2018 “Why Brands Matter” report from CPG marketing agency Acosta, shopping trips driven by national brand purchases are more valuable than private label brand trips on average by 65%. Overall, shoppers see national brands as superior to private label products in most categories.
- The perception gap increases in certain segments. Many of the categories for which shoppers indicated they purchased national brands “exclusively” or “mostly” are personal care products. Conversely, nearly all of the categories for which shoppers report “exclusively” or “mostly” selecting private brands are staple food categories, such as milk and bread.
- “National brands continue to dominate, with a worth of over $558 billion in 2017, compared to $124 billion for private label brands … A study of more than 100 retailers revealed that the retailers growing national and private label brands are experiencing the best overall growth, proving that a strategic mix is key,” John Clevenger, managing director and SVP at Acosta, said in a press release.
In an effort to appeal to the widest range of shoppers, grocers are tasked with ensuring the success of both national and private label brands. This can be tricky as they ramp up their investments in their own store product lines and, for the most part, generate more profit from these selections. The research shows that while many retailers have pivoted their strategies to push their private label lines, they shouldn’t put all of their eggs in this basket.
While the quality and reputation of private label products has improved, they still have a long way to go to overcome less-than-positive perception. A majority of shoppers believe name brands are better than store brands in most categories. This “better than” perception leads to a trust deficit — a study from Trace One found that 44% of consumers don’t buy private labels because they trust national brands more.
This doesn’t mean retailers should halt their innovation efforts. Consumers started to turn more to private label brands for their low prices during the recession. A decade later, though consumers are still very much focused on value, they’re equally focused on quality and differentiation. The process of overcoming perception issues could perhaps be expedited by marketing efforts about the quality and taste of private label products. Some retailers, like Aldi or Lidl, can leverage their award-winning products. Regional supermarkets can tailor their products to correspond with local preferences, host in-store events, provide recipe suggestions and more. And other retailers can follow Kroger's lead and try to make their private label products superior in every way.
Perhaps the best way for retailers to strike an ideal balance between national and private label brands is to understand what is worth the investment and the shelf space. The Acosta research found that there is an especially big perception gap in items such as toothpaste and dog food. Consumers “exclusively” or “mostly” choose branded products in these categories, so it may not be worth a private label investment. After all, just because store branded products generate profits and the category itself is growing doesn’t mean retailers need to chase every shiny object.
Perhaps the most telling insight from this research is that private label products are priced lower than they need to be. According to Acosta's study, the average price gap between private and national brands is approximately 20%. This price gap dilutes store brand sales as the category gets more crowded, and also isn't helping with the quality perception gap. If retailers are serious about leveling the playing field with national brands, they need to at least be playing the same game.