More Consumers Choosing Private Label, Says Nielsen

Private label products are increasingly encroaching on name brands' turf, as a majority of U.S. consumers are viewing store-brand items positively, accounting for more than $81 billion in sales in the U.S., up 10.2 percent over last year, according to new data from The Nielsen Company.

"While private label products continue to follow the success of consumer packaged goods (CPG) manufacturers' name brand introductions, more retailers are making private label a priority with messages on quality as strong as messages on value," said Todd Hale, s.v.p., consumer and shopper insights, Nielsen.

Nearly three-quarters (72 percent) of consumers said they believe store brands are good alternatives to name brands, and 62 percent of consumers reported they consider store brands to be as good as name brands, up 3 percent since 2005.

Nielsen's survey also indicates that an improved sense of quality is likely a driving factor for consumers' positive attitude toward private label products. Sixty-three percent of consumers said they believe that the private label brand quality is as good as name brands and one-third (33 percent) of consumers told Nielsen they consider some store brands are higher quality than name brands.

Not all consumers share this view, however. Sixteen percent of respondents maintain that store brands are not suitable when quality matters and 16 percent say store brands have "cheap-looking" packaging.

Price and value are paramount, the survey revealed. Seventy-four percent of consumers believe it is important to get the best price on a product. Two-thirds (67 percent) of consumers agree that store brands usually provide "extremely good value" for the money while 35 percent of consumers are willing to pay the same or more for store brands if they like it. Just under a quarter (24 percent) of consumers believe that name brand products are worth the extra price.

"In today's economy, consumers are looking for ways to save money and for many of them, that means taking a new look at private label products," said Hale. "With more retailers offering satisfaction guarantees on private label purchases and even serving up blind taste testing and trial programs, consumers' exposure to private label products has never been greater."

Earlier analysis by Nielsen shows that an increase in private label dollar sales is driven primarily by rising commodity and food prices, particularly in staple categories that are dominated by private label brands and not in unit sales. However, a recent uptick in private label unit sales suggests that budget-conscious consumers may be starting to shift away from some established brands in search of better deals. Private label represents 16 percent of dollar sales and 21 percent of unit sales, indicating that branded products still capture the lion's share of product category sales.

"Private label development varies greatly by department and we see strongest growth in products where private label has historically been strong," said Hale. "Translating private label growth outside of commodity categories requires innovation - - an area where CPG manufacturers, rather than retailers, traditionally excel."

The store brand report was based on Nielsen Homescan online survey conducted June and July 2008, with responses from nearly 54,000 U.S. consumers, geographically and demographically representative of the total U.S. population.
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