By Susan Mudd, Client Marketing Director, Valassis
Published Tuesday, Nov 8, 2016
Picture this -- a tug-of-war contest where the shopper is at the center line. At one end of the rope is the national brand, beautifully packaged and supported by a team of marketers, complete with data, advertising and glittery pom-poms, all cheering on the brand.
On the other end of this tenuous rope is the retailer’s private label brand, perhaps not as glamorous, but still in an attractive uniform. Retailers hold on tight to their end but there may be a smaller assembly of supporters on the bench. Nonetheless, the private label brand is a worthy opponent in the struggle to win the rope, and bring the shopper along with it.
But here we are in the Consumer Packaged Goods (CPG) world and, unlike a tug-of-war competition, there really isn’t a clear delineation in the sand as shoppers decide between national and private label brands. Rather, the line seems to be getting blurrier by the year as private label brands up their game. With a constant influx of retailer introductions and technology options that strive to improve shopping convenience and move the influence needle, consumers perceive the store brand as a worthy competitor, and loyalty has become harder for CPGs to secure.
Within this consideration set for consumer confidence is loyalty, which has been fluctuating plus or minus 5 points since August, and is currently at 98.6.1 While confidence is up, shoppers still seem reluctant to dive back into the indulgent days of all national brands, all the time. In fact, in 2015, 37 percent of consumers said they were buying more store brands and had less intention of switching back to CPG brands in the future. Millennials are driving some of this, as 70 percent agree that store brands are higher quality than they used to be.2 Retailers are reimagining their brands to look more like national brands, with upscale packaging – consider Safeway O Organics as an example – and a narrowing of the price gap between national and store brands. Retailers are also forging ahead in innovation, especially in the food category, by adding variety and product news to its foundational reputation of discount and value. Private Brand frozen novelties, as an example, has attracted health-conscious consumers away from ice cream and toward healthier options with greater flavor variety and cleaner ingredient lists.
Inflation also fuels the fire for store brands, making up 17 percent of CPG industry dollars.3 While consumers continue to manage their budgets, store brands often win, as many national brands, carrying increased prices due to inflation, make it easier for private brands to entice consumers to purchase. This is particularly true for commodities (trash bags and refrigerated meats, for example). And, product recalls are another example of store brands getting a boost. Since the Tylenol recall in 1982, the Centers for Disease Control and Prevention (CDC) has documented over 20 CPG brand recalls in the United States – this, unfortunately, can lessen brand loyalty and trust.
On the flip-side, national brands have some strategies of their own. Currently, the ultimate tug-of-war strategy and the Achilles heel of the store brand contender is the coupon. Coupons can level the playing field in vulnerable categories where private brands are gaining ground, like K-Cups, olive oils, snacks and salad dressings, which have all seen significant growth over the last three years.4 Saving money and having the best mix of price and quality continue to top the list for choosing a store.5 Regardless of the swinging economic pendulum and ever-changing consumer mindset, leveraging coupons on branded CPG purchases also plays into the consumer desire to be viewed as a smart shopper. In fact, according to The Checkout, 5 Year Trend report, consumers said that buying national brand names, even though they may be similar to the private label alternative, still makes them “feel better” about themselves and report feeling more successful and like they’re better homemakers.5 Coupon use is emotionally charged – tapping into the pleasure centers of the brain as they have been for over 100 years.
So what should brands do with this game of strength, weakness and wit? For CPGs, reinforcing the foundation of quality products and messages that truly resonate with the consumer goes a long way, along with brand data and insights that help inform the innovation funnel. Keeping your best player on the rope, the coupon, as a game-changer will continue to help drive the shopper past the proverbial center line of decision. But don’t take your eyes off of the private brand contender, which has no intention of letting up – not by a long shot.
1) Wall Street Journal: Consumer Confidence Steps Back in October, Oct 5, 2016;
2) Mintel.com: Nearly Half of US Millennials find store brand food products more innovative than name brands, March 2015#1;
3) IRI: Taking Stock; of CPG Past and Future: Gear Up Now for a Year of Growth, January 2016;
4) Hartbeat Exec: The Premiumization of Private Label, 2016, Volume 6 Issue 2;
5) The Checkout: Five-Year Shopper Evolution, Issue 1, 2016