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Food Wars: Private Labels vs. Name Brands

  • Susan
  • April 23, 2009
Orange Coke

I remember a time when most consumers would pass up a private label or generic food product and automatically reach for the national brand instead.  There was something instinctively trustworthy about Kellogg’s Corn Flakes, Kraft Macaroni and Cheese, Campbell’s soup and Coca-Cola.  Perhaps it was partial snobbery or partial ignorance, but no one wanted to be seen with boxes or cans of no-name food in their shopping cart.  After all, did anyone really know what was in those nondescript package or how it tasted?  Price was not a factor.  As food snobs, consumers were not going to be caught buying or trying a private label product.

Fast-forward twenty years. Times have changed; the economy has tanked.  Today’s consumers are looking for creative ways to stretch their food dollars, and now it’s the trusted, national brands that are bypassed in favor of private label or generic brands.  Consumers don’t need research to confirm this trend, but the NPD Group, a leading provider of retail market research, has issued a report and the results are pretty conclusive.

On April 21, NPD’s Private Label Perceptions, Usage Patterns and Intentions confirmed that last year, 24 percent of all food and beverages served in American homes were store brands, up from 18 percent in 1999.  Today, 97 percent of all households consume store brand food products on a regular basis.

“There is no question that private label foods have become an integral part of American life,”says Harry Balzer, chief industry analyst at NPD and an authority on eating patterns in America. “Today over half of all store brand food eatings are the end dish”

Price and value are the main reasons why consumers purchase private label or store brands, according to NPD’s survey of grocery shoppers, but perhaps most telling is that the majority of respondents also feel that the quality of store brands is often equal to, or in some cases better than, name brands. Users of private label foods and beverages span all income levels and demographic profiles.

The fact that consumers are seeing equality between private label and name brand food products is something that should signal concern with the major food manufacturers.

“The bottom line is that private label foods can offer a great value to budget-minded consumers. If a consumer is working with less disposable income, stretching the food dollar and finding value will naturally gain importance,”says Dori Hickey, director of product management at NPD and author of the report. “Name brand and private label marketers will each need to focus on differentiating their products while finding ways to effectively address consumer needs, as the lines between the two are blurring in the minds of consumers.”

The Consumer is Winning

Both national brand manufacturers and supermarket chains are recognizing that more food is being purchased with private labels and the trusted Kelloggs, Krafts and Campbells are fighting for shelf space with their robust competitors.  All of this bodes well for the consumer, who appears to be the winner in these brand wars.  Ultimately, they may be the beneficiary of some savvy marketing and promotional programs that attempt to lure them back into purchasing “the higher priced spread”  More cents-off coupons for brand name food products are available in the newspapers, at point-of-purchase displays and online, in an attempt to equal the playing field, along with in-store offers and other advertising gimmicks.  However, consumers are definitely more conscientious about comparative shopping. They will check carefully before putting that branded product in their shopping cart.

Supermarket chains, on the other hand, are also capitalizing on their private label brands, with new and more attractive packing, lower price points and in-store specials.  The battle of the brands is on and it looks like the consumer is winning.  And as consumers realize that there is very little difference (if any) between national and private label products, they have the potential power to erode the name brand manufacturers’ market share and threaten their long-term health and sustainability.

This war will be long and hard-fought, especially as the recession deepens and consumer spending tightens, but it will be interesting to track this topic once the economy improves and shoppers feel better about the health of their pocketbook.  Will they go back to the national brands?  Or will they embrace the private label, store brand and generic counterparts as having the same flavor, quality and nutritional benefits, but at a lower price?

Time will tell.  I’m looking forward to a front row seat.

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