2006 ACN Private Label Report

1Confidential & Proprietary ● Copyright © 2006 ACNielsen ● a VNU business

U.S. Private Label Trends & Insights

August 2006

2

Confidential & Proprietary ● Copyright © 2006 ACNielsen ● a VNU business

Agenda

●Executive Insights

●Research Design

●Detailed Findings–Private Label Overview–Segmentation Insights

●Summary & Closing Thoughts

●Appendix


Executive Insights

4


Executive Insights—Retailer

●Private Label (PL) Gaining Share of Wallet & Share of Mind

●Retailers with > PL focus (i.e. those with higher PL shares) drive solid buying behaviors & more positive consumer attitudes towards PL

– Particularly true for top-spend PL buyers

5



● Heavier PL buyers offset branded spending with PL buying—enabling consumer savings

– Reduced spending enables retailers to compete in a “value-oriented” environment

● Heavier PL buyers are in stores more often…..

– Making more PL trips & more branded trips– Providing opportunities to drive store loyalty

● Findings suggest an opportunity to narrow price relationship between PL & branded & increase PL & retailer sales

6



●Consumers who spend the most at retail have a weaker PL commitment

– These are also the consumers where PL sales opportunities are the greatest

– Suggesting a need for > focus on premium PL offerings and/or the need to increase trial via:>In-store sampling>Advertising>Features & displays

7


Executive Insights—Retailer Focus

●PL no longer limited to historic buyer profile of low to middle income, blue collar families

●High buyer development in $70k+ income households

– Especially among households who are top-spend PL buyers & shop in retailers with strong PL committed

8


Executive Insights—Manufacturer Focus

● PL sales growing faster than branded items● Where PL used to be less expensive alternative,

consumers now include PL as a “brand”– Consumers associate a store’s brand with that store’s

image, which can translate into a powerful brand● With aggressive promotions & pricing, manufacturers

now forced to compete against PL & each other● Manufacturers continue to lead innovation, however PL

beginning to position unique items as wells as comparative items

● Manufacturers will be more aggressive in the defense of their category space & positioning– Be experts in category consumer insights, category

assortment & price/promotion impact


Research Design

10


Research Design

● Data Source: Homescan Consumer Panel, ACNielsen Strategic Planner® & Wal-Mart Channel services

● Private Label includes Store Brands & Co-branded products, but not “exclusive” brands – Michael Graves Designs & Sonia Kashuk (Target)

● Behavioral & Attitudinal Insights:– ACNielsen collaborated with Daymon & DemandTec to provide

consumer research to demonstrate how retailers can build profitable customer loyalty & competitive differentiation through private brands> This presentation includes excerpts from the ACNielsen portion of

the study● Footnote designation of source:

– Homescan—Consumer Panel Data—All Channels except as noted– Scan—Food/Drug/Mass including Wal-Mart


Private Label Overview

12


13


PL is Big Business

● A Very Public Record–19+ product categories exceed $1 billion in PL

products business*–PL in the pantry of virtually all U.S. home –A typical cupboard boasts 20+ PL products>Once a stock-up, penny-pinching alternative is

now a modern-day mainstay–Average household spends $500 + a year on PL

—purchasing over once per week

*across FDM w/ WM

14


PL realizing growing sales throughout the world

PL Share

2%

4%

6%

16%

23%

17%

0% 5% 10% 15% 20% 25%

Latin America

Asia Pacific

EmergingMarkets

North America

Europe

Global

PL Growth

5%

5%

11%

7%

4%

5%

0% 5% 10%

Latin America

Asia Pacific

EmergingMarkets

North America

Europe

Global

Sales & Growth Rates of Private Label by Region(Based on Value Sales)

15


Within the US, many successful retailers focused on PL across many channels

● Aldi● Save-A-Lot● Trader Joe’s● Costco

● Dollar General● Ikea● Old Navy● The Gap● The Sharper Image● Radio Shack● Victoria’s Secret● Lands End

Some of the fastest growing retailers have made private label a

priority

Food Retailers

16


And many Mainstream Grocery & Drug retailers include strong PL presence

See appendix for other high, medium, low PL retailers

17


34% 30%

64%

All CPG Categories Branded Items Pvt Lbl Items

Dollar Sales growth 1997 to 2005

PL has grown at 2x the rate of branded items over the last 8 years

Total U.S.; Homescan All Outlets; all UPC-coded categories included

18


PL growth has outpaced branded in every year (except one) over the past eight

Total U.S.; Homescan All Outlets; all UPC-coded categories included

Notable difference between branded & PL growth in 2001 during economic recession

19


16%

20%

12%

18%

15%14% 14%

3%

Total $2MM+ Groc Mass Merch SuperCenters

Drug Stores Warehouse Dollar Stores Conv/Gas

% of $ Sales from PL

PL represents a significant percent of sales across nearly all channels

Total U.S.; Annual 2005; Homescan All Outlets; all UPC-coded categories included

16% AVG

20


38%

18%

12%14% 13%

20%

13% 13%

8%

0%

Dairy Frozen Health &Beauty Care

Dry Grocery Meat Deli Non-Food FreshProduce

GeneralMerchandise

AlcoholicBeverages

% of $ Sales from PL

PL most developed in Dairy with room to grow in many departments

15% AVG

Total U.S.; Annual 2005; Food/Drug/Mass incl W-M;

21


The strength of Private Label Share varies by channel

Private Label $ Share by Department

17

43

2015 13

7

18

42

16 1418

68

2621

12

20 1815

22

1421 19

2

Dry Grocery Dairy Frozen Non-Foods HBC GM

Grocery Mass w/ Supers Drug WH/Club

Dairy has strongest PL Share across all

Channels

Total U.S.; Annual 2005; Homescan

22


PL is a more than $1 billion business in 19 mega categories

FDM:Largest PL $ Sales

$8.2 Billion

$4.3 Billion

$3.5 Billion

$2.9 Billion

$1.8 Billion

$1.7 Billion

$1.5 Billion

$1.5 Billion

$1.5 Billion

$1.5 Billion

$1.4 Billion

$1.3 Billion

$1.3 Billion

Milk

Bread & Baked Goods

Cheese

Paper Products

Medications/Remedies

Fresh Produce

Packaged Meat

Eggs-Fresh

Unprep Meat/Seafood-Frz

Pet Food

Bottled Water

Vitamins

Carbonated Beverages

Total U.S.; Annual 2005; Food/Drug/Mass incl W-M; top 13 of 118 mega categories shown

23


PL share strength is certainly among commodity grocery products; however, it also owns 41%+ of Wrapping Materials & First Aid

FDM:Largest PL Unit Shares

63%

59%

52%

42%

42%

42%

42%

42%

41%

41%

39%

38%

Eggs-Fresh

Milk

Sugar Sugar Substitutes

Vegetables&Grains Dry

Dessert/Fruit Topping FZ

Vegetables Frozen

First Aid

Vegetables-Canned

Bottled Water

Wrapping Materials/Bags

Cot Chs/SourCrm/Topping

Fruit Canned

Total U.S.; Annual 2005; Food/Drug/Mass incl W-M; top 12 of 118 mega categories shown

24


The top Mega Categories for Private Label Dollar Sales in 2005 are across all major departments

Total U.S; Annual 2005; Homescan, All Channels,; top 15 of 121 mega categories

While edible categories have highest % total PL Sales, Paper Products,

Vitamins & Med/Remedies

are included

These 15 categories account for half of all PL Sales

25


FDM:Largest PL Unit

Volume % Increases(over past year)

+34%

+17%

+17%

+15%

+15%

+14%

+14%

+13%

+13%

+13%

+12%

+12%

GROOMING AIDS

TEA

OFFICE/SCHOOL SUPPLIES

PREPARED FOODS-FROZEN

PUDDINGS/DESSERTS-DAIRY

KITCHEN GADGETS

YOGURT

BREAKFAST FOODS-FROZEN

BREAKFAST FOODS

SOFT DRINKS-NON CARB

FRESH MEAT

COOKWARE

PL growing fast in both growth & declining categoriesAre retailers driving higher margins in declining/slow growth categories thru PL?

Total U.S.; Annual 2005; Food/Drug/Mass incl W-M; top 12 of 118 mega categories shown (with current share >1.0)

Total Category Change (+6%)

(+12%)

(+1%)

(+5%)

(+18%)

(+2%)

(+11%)

(+2%)

(+5%)

(-5%)

(+13%)

(+3%)

Is less Branded focus an issue?

26


FDM:Largest PL Unit

Volume % Increases

+60%

+34%

+34%

+29%

+17%

+17%

+15%

+15%

+199%

+444%SEASONAL GENMERCHANDISE

BEER

VARNISH & SHELLAC

BABY FOOD

GROOMING AIDS

DEODORANT

TEA

OFFICE/SCHOOL SUPPLIES

PREPARED FOODS-FROZEN

PUDDINGS/DESSERTS-DAIRY

PL growing fast in categories that currently have a small PL presence

Total U.S.; Annual 2005; Food/Drug/Mass w/ W-M; top 10 of 118 mega categories shown

(PL Unit Share of Category) 5

1

0

14

1

1

10

12

5

8

27


Not all PL products are thriving

FDM:Largest PL Unit

Volume % Decreases(over past year)

-17%

-16%

-15%

-14%

-13%

-8%

-8%

-6%

-6%

-27% INSECTICIDES REPELLANTS

CANDLES/INCENSE & ACCES

FRAGRANCES - WOMEN

MEAL STARTERS-FROZEN

SHAVING NEEDS

FRESHENERS/DEODORIZERS

BATTERY/FLASHLITE/CHG

JUICES/DRINKS-FROZEN

MEN'S TOILETRIES

SANITARY PRTCN

Total U.S.; Annual 2005; Food/Drug/Mass incl W-M; top 10 of 118 mega categories shown (with current share =>1.0)

Total Category Change(-7%)

(- 4%)

(+3%)

(NC)

(NC)

(NC)

(-3%)

(-8%)

(+14%)

(-2%)

28


PL is still a minor player in attracting buyers in many categories

Largest Penetration Gap between Branded & PL

5

18

25

13

32

36

32

18

29

23

80

88

95

75

90

94

88

73

84

76

Electronics, Records, Tapes

Hair Care

Detergents

Housewares, Appliances

Household Cleaners

Oral Hygiene

Personal Soap & Bath Additives

Skin Care Preparations

Batteries & Flashlights

Pizza/Snacks/Hors Doeurves-Frzn

Private Label Branded

Total US; Annual 2005; Homescan—All Channel; Household Penetration,

Gap 75

71

70

62

58

57

56

55

55

53

Categories > $2 Billion

29


The portion of shoppers who purchase Private Label exclusively is relatively small for most categories

% Exclusive Branded/ Store/Dual Shoppers

87

25

7951 53

38

1

1

5

1 724

12

74

17

48 40 38

Paper Products Detergents CannedVegetables

CarbonatedBeverage

Butter &Margarine

Pain Relievers

Dual Store Branded

Shopper loyalty to Brands varies greatly by Category, with 74% of Detergent Shoppers purchasing exclusively branded Detergents, while just 12% of Paper Products Buyers are branded exclusive

Total U.S.; Annual 2005; Homescan, All Channel

Dual: Purchased both Branded & PL at least once during the yearStore—Only purchased Store Brands in this category during the yearBrandedBranded: Only Purchased Branded items for this category during the year

30


Private Label UPCs are among the top sellers across all channels

% Top Items Report

27%

17% 15% 13% 12%

6%

38%

16%21%

11%16%

10%

50%

14%

27%

12%

22%

7%

Supercenters Dollar Channel Mass w/oSupers

Drug Channel WarehouseClub

GroceryChannel

Top 4000 Top 1000 Top 100 The Strength of individual Private Label varies greatly by channel

Since Warehouse Club/Supercenters/ Mass are each concentrated into a few main players, their UPC’s can more easily rise to the top vs. Grocery or Dollar Stores

Total US; Annual 2005; Homescan

31


Paper Products & Bottled Water are the top items when Milk, Eggs & Baked Goods are taken out of the equation

1) Multiple Color Roll Decorator 2 Ply 255 Count 3 Ct2) Extra Fine Sugar Bag 5 Po3) Butter Sweet Cream Grade AA 4St 1 Po4) Carrots Miniature (Mini) Peeled Whole F 16 Oz5) Montana Springs Nbp 128 Oz (Water)6) Distilled NBP Sodium Free 128 Oz (Water)7) Garden Salad Mix 16 Oz8) Regular Cola Non Bottles 67.6 Oz9) Processed American Imitation Single Slices Cheeses 16 Oz10) Saltine Cracker(s) Fs 16 Oz11) Liquid Bleach 96 Oz12) Non-Dairy Coffee Creamer Jar 35.3 Oz13) Orange Juice From Concentrate Unsweetened Refrigerated 128 Oz14) Drinking NBP 128 Oz (Water)15) Chicken Breast Boneless & Skinless Frozen 48 Oz16) Natural Shredded Cheddar Fancy Cheese(s) 8 Oz17) Apple Juice Unsweetened 96 Oz18) White 2P 200S Toilet-Tissue 6 Ct19) Tuna Water Chunk Light 6 Oz20) Luncheon Assorted Paper Napkin 1Ply 400 Ct Total US ; Annual 2005; Homescan


Typical Private Label Behavior

33


Virtually All households buy PL; they purchase 66 times a year & spend $8 per trip

99.9

66

$7.93 4.6

% hhld penetration

purchase frequency

purchase size ($)

purch size (un)

99.9

57.6

$7.46 4.4

W/O PL Bread, Milk, & Eggs:

Total U.S.; Annual 2005; Homescan; All mega categories included

Even without milk, eggs, & bread—PL buying behavior is

substantial

34


$283

$311

$359

$401

$430

1997

1999

2001

2003

2005

Slight decline in frequency offset by larger purchase size lead to a higher Buying Rate in 2005

Total U.S.; Homescan; *PL bread & milk & eggs transactions excluded

Buying Rate*

56

56

57

59

58

1997

1999

2001

2003

2005

$5.06

$5.56

$6.29

$6.80

$7.46

1997

1999

2001

2003

2005

Purchase Frequency* PL $ per Occasion*

35


% of hhlds buying PL in ... Mega Categories

5%

16%

26%

26%

18%

8%

1%

4%

12%

20%

23%

20%

14%

7%

1-10 PG

11-20 PG

21-30 PG

31-40 PG

41-50 PG

51-60 PG

61-118 PG

2005

1999

Total U.S.; Homescan; PL bread & milk & eggs transactions excluded

Depth of PL purchasing has grown as consumers extend PL acceptance

36


A typical PL household looks like…

5+ member hhld size 15% of PL $ 138 index

Hhlds with kids of all ages 41% of PL $ 120 index

Blue Collar HH occupation 26% of PL $ 111 index

Total U.S.; Annual 2005; Homescan; PL bread & milk & eggs transactions excluded

37


PL dollars growing from atypical PL households

45

53

35

5249

65

41

59

1-2 member Hhlds Living Comf /Affluent

Prof / Wh Cllr HHHeads

Hhlds W/O Kids

1997 2005

Distribution of PL Dollars

Total US; ACNielsen Homescan; PL bread, milk & eggs transactions excluded


All Private Label Buyers Are Not Alike

39


25%8%

25%

16%

25%

26%

25%

50%

% of Buyers % of Dollars

Top Spend

High Spend

Medium Spend

Low Spend

Private Label dollars concentrated among half of U.S. households

PL buyers who are:

50% of the buyers drove over ¾ of the sales; heaviest 25% drove half of the sales

{ }Total U.S.; Annual 2005; Homescan; PL bread & milk & eggs transactions excluded

40


Top Spend PL buyers spend 7X the dollars on PL than their Low Spend Counterparts

$121

$273

$451

$876

6 10 14 20

Low Spend MediumSpend

High Spend Top Spend

PL $ per Hhld

PL % of $ loyalty They also devote a greater percentage

of their total category

purchases to Private Label

offerings


41


High & Top Spend buyers purchase more frequently & spend more per occasion

27

49

65

89

$4.45 $5.58 $6.96$9.79

Low Spend MediumSpend

High Spend Top Spend

PL occsns per Hhld

PL $ per occsn

Purchase frequency is key, but heavier buyers also spend more per buying

occasion


42


High & Top Spend purchasers pick up PL on nearly half of their shopping occasions (2X the percentage of Low Spend buyers)

19%

29%

35%

42%

Low Spend Medium Spend High Spend Top Spend

% of trips with PL


43


LowSpend

MediumSpend

HighSpend

TopSpend# of PL product

groups purchased

10 or less 16% 1% 0% 0%

11-20 37% 9% 2% 1%

21-30 35% 30% 12% 3%

31-40 11% 40% 30% 11%

41-50 1% 18% 36% 26%

51-60 0% 2% 18% 35%

61-118 0% 0% 2% 24%

% of buyers

High & Top Spend PL buyers purchase PL products across a great number of categories, but Low Spend buyers still go fairly deep

85%

72%


44


46

31

19

8

27

34

37

32

21

27

34

41

7

7

10

19

Low Spend

Medium Spend

High Spend

Top Spend

1 mem 2 mem 3-4 mem 5+ mem

Most Top Spend buyers are larger households (3+ members)

Household Size: Distribution of Buyers


45


17

17

16

18

12

15

17

22

16

19

21

23

25

29

31

27

30

20

15

11

Low Spend

Medium Spend

High Spend

Top Spend

FH Under 35 FH 35-44 FH 45-54 FH 55+ No FH

Most Top Spend PL buyers tend to be households w/younger female heads

Household Female Head Age:Distribution of Buyers


46


10

9

9

10

21

23

24

27

36

37

38

38

33

31

30

25

Low Spend

Medium Spend

High Spend

Top Spend

Poor Getting By Liv Comfortably Affluent

Top Spend PL buyers skewed slightly to those who need lower prices

Household Affluency: Distribution of Buyers


47


31

30

27

26

14

13

11

11

20

21

25

29

35

36

37

35

Low Spend

Medium Spend

High Spend

Top Spend

Prof/Mngrl White Cllr Blue Cllr Not Working

Outside of folks not working, the largest segment of Low Spend PL buyers are professional vs Top Spend buyers who are in blue collar jobs

Household Head Occupation: Distribution of Buyers



Additional Private Label Behavior Insights

49


Research Design

●Homescan Panelists, based on calendar 2005 purchasing, were segmented into:

– Light, medium, heavy & top-spend PL* buying households

●To determine differences in PL strength across households with low versus high spending habits, we further segmented households into:

– Light, medium, heavy & top-spend “all-outlet”* buying households

* All-Outlet basis for UPC-coded items within CPG departments & categories

50


Robust samples of PL buyer groups50% of sales concentrated in top-spend PL buyers

Low-Spend PL Buyers

Medium-Spend PL Buyers

High-Spend PL Buyers

Top-Spend PL Buyers

% of PL Buyers

25% 25% 25% 25%

% of PL Dollars

8% 16% 26% 50%

Annual PL spending rates

$260 or less > $260 to $440

> $440 to $700

> $700

~ Sample Size

12,650 12,650 12,650 12,650

51


Research Design

● To demonstrate if retailers strongly committed to PL drive success with consumers, we also segmented retailers (within each of the PL spend groups) into:

– Low Share PL Retailers*—avg. PL $ share of 10%

– Med. Share PL Retailers—avg. PL $ share of 17% – High Share PL Retailers—avg. PL $ share of 27%

* All-Outlet basis for UPC-coded items within CPG departments & categories

52


Research Design

●We then examined differences in:

–PL & branded buying

–Demographics of buyers

–Attitudes towards PL & branded products

53


Heavier spend PL buyers devote > share of their $ sales to PL

PRIVATE LABEL

PL SHARE RETAILERS: LOW MEDIUM HIGH LOW MEDIUM HIGH LOW MEDIUM HIGH LOW MEDIUM HIGH

Low TOTAL DEPTS Spenders

19 16 14 20 22 17 21 25 n/a n/a n/a n/a

Mid TOTAL DEPTS Spenders

15 11 12 17 16 15 20 23 21 23 33 28

High TOTAL DEPTS Spenders

12 7 7 14 10 11 16 16 17 20 25 27

Top TOTAL DEPTS Spenders

9 3 n/a 10 6 6 11 10 11 14 18 21

BRANDED



81 84 86 80 78 83 79 75 n/a n/a n/a n/a


85 89 88 83 84 85 80 77 79 77 67 72


88 93 93 86 90 89 84 84 83 80 75 73


91 97 n/a 90 94 94 89 90 89 86 82 79

Low Spend PL Buyers Mid-Spend PL Buyers High-Spend PL Buyers Top-Spend PL Buyers

% of Total Dept Sales

TOTAL OUTLETS


TOTAL OUTLETS


54


> PL $ share in more committed PL retailers within top PL buyers

PRIVATE LABEL



19 16 14 20 22 17 21 25 n/a n/a n/a n/a


15 11 12 17 16 15 20 23 21 23 33 28


12 7 7 14 10 11 16 16 17 20 25 27


9 3 n/a 10 6 6 11 10 11 14 18 21

BRANDED



81 84 86 80 78 83 79 75 n/a n/a n/a n/a


85 89 88 83 84 85 80 77 79 77 67 72


88 93 93 86 90 89 84 84 83 80 75 73


91 97 n/a 90 94 94 89 90 89 86 82 79



TOTAL OUTLETS


TOTAL OUTLETS


55


PRIVATE LABEL



19 16 14 20 22 17 21 25 n/a n/a n/a n/a


15 11 12 17 16 15 20 23 21 23 33 28


12 7 7 14 10 11 16 16 17 20 25 27


9 3 n/a 10 6 6 11 10 11 14 18 21

PL SHARE RETAILERS:



TOTAL OUTLETS

Consumers who spend the most at retail have a weaker PL commitment

● These consumers provide largest PL opportunity– Leverage PL to maximize trips among these most

valuable shoppers– Leverage PL to get consumers to shop entire store

KeyTakeaway

Expand premium PL offerings to appeal to these consumers and/or increase PL trial

56


Most heavier PL buyers make more PL trips & brand trips—consistent across channels

PRIVATE LABEL



66 52 57 68 64 62 67 82 n/a n/a n/a n/a


61 48 57 68 60 66 73 72 77 73 90 85


59 44 41 64 54 58 73 71 71 79 86 89


54 30 n/a 58 51 47 66 68 64 77 92 89

BRANDED



115 112 118 119 118 119 110 137 n/a n/a n/a n/a


124 122 130 131 123 131 131 125 133 125 130 133


143 135 135 140 132 136 144 135 135 145 138 142


154 139 n/a 147 141 138 160 145 138 159 156 150


TRIPS PER HOUSEHOLD

TOTAL OUTLETS

TRIPS PER HOUSEHOLD

TOTAL OUTLETS


KeyTakeaway

Retailers w/strong PL commitment have opportunities to drive store trips & store loyalty

57


Top-spend PL consumers spend less overall due to the lower prices they pay for PL items

●As PL spending increases, branded spending decreases, reducing overall basket size

●Reduced spending enables retailers to compete in a “value-oriented” environment

KeyTakeaway

Retailers need to continue to promote PL as an important way to maintain & win value-oriented shoppers

58


PL no longer limited to low/middle income & blue collar households

High buyer development in $70k+ Particularly among top-spend PL buyers

in high PL share retailers


Low Total Spenders 122 144 119 n/a 60 126 n/a 96 n/a 52 131 n/a

Mid Total Spenders 110 153 98 n/a 45 90 162 86 150 n/a 93 177

High Total Spenders 91 148 72 126 n/a 63 135 63 102 n/a 58 174

Top Total Spenders n/a 149 n/a 91 143 n/a 109 n/a 82 146 n/a 123

High-Spend PL Buyers Top-Spend PL Buyers

Buyer Index - Income $70000 +

Low Spend PL Buyers Mid-Spend PL Buyers

KeyTakeaway Retailers can use PL to appeal to a broad range of shoppers


Private Label Attitudinal Insights

60


20 question survey fielded to Homescan panel across six dimensions

Q1: Store brand products are a good alternative to name brands

Q2: I don’t think store brands are suitable for products where quality really matters

Q3: Generally, store brands seem to have very cheap-looking packaging, which puts me off buying them

Q4: Store brands are usually just as good as name brands

Q5: These days, the quality of most store brands is at least as good as those of the usual name brands

Q6: Some store brand products are higher quality than name brand products

Q7: Store brands usually are an extremely good value for the money

Q8: Store brands are really meant for people who are on tight budgets and can’t afford the best brands

Q9: Name brand products are worth the extra price

Q10: If I really like a particular store brand product, I am willing to pay the same or more for it than a name brand product

Q11: I often compare the prices of the store brand products in my primary grocery store to store brand products in other stores

Q12: It’s important to me to always get the best price on a product

Q13: I just don’t know enough about store brands to want to try them

Q14: I always buy the same name brands I know and trust

Q15: I would buy more store brand products if a larger variety of products was available

Q16: It’s difficult for me to find store brand products in my primary grocery store

Q17: I think that store brands should always have the store’s name on the product

Q18: I would try more store brand products if they came with a money-back guarantee

Q19: I don’t feel comfortable serving store brand products to my guests

Q20: I like to try new products

Assortment

Retailer Endorsement

Social

Awareness

Quality

Price Value

61


Most see PL as a good alternative to name brands

Lower scores for top “all-category” spenders

% of responses in agreement


Low Total Spenders 73 69 69 71 78 76 72 89 n/a n/a n/a n/a

Mid Total Spenders 67 57 60 69 68 71 77 79 77 75 78 84

High Total Spenders 62 43 47 64 58 59 70 71 72 75 85 80

Top Total Spenders 54 n/a n/a 62 41 44 58 57 60 71 74 74




62


Higher scores among med & high PL share retailers within top-spend PL buyers

% of responses in agreement


Low Total Spenders 73 69 69 71 78 76 72 89 n/a n/a n/a n/a

Mid Total Spenders 67 57 60 69 68 71 77 79 77 75 78 84

High Total Spenders 62 43 47 64 58 59 70 71 72 75 85 80

Top Total Spenders 54 n/a n/a 62 41 44 58 57 60 71 74 74




63


PL is in a position to compete on quality with national brands

● Up to 85% of top-spend PL buyers say they are a good alternative to brands

● 59% of consumers say they are “just as good”● 1/3 of consumers state that some PL items have

“higher quality” than brands● 4 of 5 consumers think PL products are acceptable

when quality really matters● Improvements to PL packaging paying off:

– Even low-spend PL consumers have a positive image of packaging

● 9 of 10 consumers say they feel comfortable serving PL to their guests

KeyTakeaway

Retailers must position their PL products based on quality too, not solely on price

64


Consumers have positive attitudes towards PL’s value proposition

●2 out of 3 consumers believe PL is “an extremely good value”

●Consumers feel that PL is no longer for ‘lower income’ families

●73% of consumers do not think brands are worth the extra price–36% are willing to pay the same or more for PL items they really

like

●About half of consumers compare PL prices between retailers

KeyTakeaway

Retailers need to communicate the PL value proposition to consumers; if you have a unique/high quality item, don’t be afraid to price higher

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Opportunities to expand PL assortment

●Almost half of consumers state they would buy more PL products if a larger variety was available

KeyTakeaway

Retailers should focus on adding items that fulfill a consumer need versus simply adding new items


Summary & Implications

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Private Label is Big Business—but still has room to grow

● Private Label is purchased by all consumers across all demographic groups– Private Label has expanded beyond households with

stretched incomes to attract economically comfortable households

● Frequency has declined slightly but the increase in purchase size compensated resulting in higher spending

● PL Growth continues to outpace Branded growth

Summary

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Summary

●Many successful retailers have focused effort on PL—enhancing their “brand” image

●Opportunity for growth is highlighted by the gap in development across different retailer/channels

●PL purchases are not all eggs, bread & milk–Some major categories are not well developed–Those Retailers/PL manufacturers that can

successfully communicate efficacy / quality will make in roads in the under developed categories such as Hair Care, Detergent, & Oral Hygiene.

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Manufacturer Strategy

●Tighten your understanding of your consumers—target specifically to your key demographic groups

●Differentiate yourself—lead the way with attractive product packaging, convenient, new forms, desirable added ingredients

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Manufacturer Strategy

●Re-examine the development of PL in your category, the department in general, & your key retail accounts

●Anticipate PL’s future growth potential & plan proactively

●Consider increased promotional activity to compete with PL if you compete in a price sensitive category

●Show your retailer partners how they might benefit from less drastic promotions & price discounting

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Retailer Strategy

● Look into other channel types & identify their largest Private Label businesses– Consider if Private Label focus on those same categories

is appropriate given the category role in your corporate strategy

– Identify opportunities in additional categories where you can lead, versus follow

● Penetration of Private Label products runs deep; use cross promotions to introduce consumers to new Private Label entries & grow Private Label sales

● Retailers can use Private Label to appeal to a broad range of shoppers

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Retailer Strategy

●Private Label offerings don’t necessarily have to be less expensive; creating & investing in your own brand image can foster loyalty & could command a premium price

●Retailers should focus on adding items that fulfill a consumer need versus simply adding new items

●Retailers w/strong Private Label commitment have opportunities to drive store trips & store loyalty

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Retailer Impact

● Heavier Private Label buyers exhibit lower “all-category” spend compared to lower Private Label spend segments

– Supports examination & improvement of Private Label price relationships versus “brand/Private Label gap” approach

● Opportunity to drive more Private Label trips among top “all-category” spenders

– Will increased focus on premium offerings help?– Is better communication of quality & uniqueness?

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Consider these positioning strategies

● Low-Cost Alternative–Conventional private label mindset–Good for commodity categories

● Value Positioning– Emphasis on meeting price needs & quality desires–Communicate quality in packaging & promotion

● Gourmet / Premium– Premium price, packaging– Brand you would serve to guests

● Health / Lite (look for growth here)– Low cal, organic, natural, whole grain–Convenience, while “good for you” opportunities

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Future Vision

●The growth of PL is not anticipated to slow down anytime soon–The fastest growing channels (Club Stores,

Dollar Stores, Category Killers) are those that are also working hard to create their own Store Brand product & message

–Continued consolidation of retailers will add fuel to the desire of large retailers to create their own identity across the store

–Evolving PL programs into mid-tier & premium offerings to attract increased interest & sales from non-traditional PL demographic segments

–Economic Impact will fuel growth of PL

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Future Vision

●Focus on how to maximize consumer variety & value with PL & branded assortment living in harmony–Does not necessarily mean offering Private

Label & just 1-2 brands per category

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Future Vision

● Look for opportunities to develop “exclusive brands” or “Co-Branded” items rather than low-cost substitutes– Michael Graves Designs (Target)– Martha Stewart (Kmart)– Craftsman Tools (Sears)– Kenmore (Sears)– Gap Jeans (Gap)– Slurpee (7-Eleven)– Charles Shaw “2-Buck Chuck” Wine (Trader Joe’s)– Frango Mints (Marshall Fields)– 8 O’Clock Coffee (was A&P private label)– Kirkland—Paul Newman, Michelin, Starbucks (Costco)

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Are you ready to protect your brand franchiseOr

Your store’s shoppers by understanding

Who it’s attracting?What else they’re buying?

And why they are buying it?

For customized insights, contact your Homescan & Spectra Specialist

Private LabelThe continuing growth vehicle

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Appendix

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High PL Share RetailersPL represents ~27% of total sales

● ALDI● SAVE-A-LOT● PANTRY FOODS● KROGER● DILLON● H-E-B● WEGMANS● FRYS FOOD STORE● SMITHS FOOD & DR● FOOD 4 LESS (KROGER)● SAFEWAY● HANNAFORD● KING SOOPERS● WEIS● COUNTRY MART● FOOD CITY● BROOKSHIRE BROS● COSTCO● HY VEE● FRED MEYER● ECONOFOODS● ALBERTSONS● SAVE RITE (WINN DIXIE)● WALGREENS● DOLLAR GENERAL● DEMOULAS/MARKET BASKET● WINN DIXIE● QUALITY MARKET

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Medium PL Share Retailers PL represents ~17% of total sales

● SUPER 1 FOODS● BROOKSHIRE● TOPS MARKET● WALMART NEIGHBORHOOD STORES● MARKET PLACE● HARRIS TEETER● FOODLAND● BI LO● VONS● STATER BROS● PUBLIX● GIANT FOODS INC. (GIANT CARLISLE)● PRICE CHOPPER● MARK IT/THRIFTWAY● MEIJER● TOP FOOD/HAGGENS● KASH N KARRY● WAL-MART SUPER● PIGGLY WIGGLY● FOOD WORLD (BRUNOS)● STOP + SHOP● FOOD LION● DOMINICKS● MARTINS● CVS● BIG Y● ACME

● SAVE MART● RALPHS● SHAWS● RANDALLS● SHOP N SAVE (SUPERVALU)● SACK N SAVE● PATHMARK● GENUARDI● GIANT EAGLE● SHOPPERS FOOD● SHOPRITE● A&P 2004● UNITED● INGLES● LOWES● BEL AIR MARKETS● QUALITY FOOD CENTER● SUPER VALU● BRUNOS● RALEYS● FARMER JACK● TOM THUMB● HOMELAND● IGA● FIESTA● SUPER FRESH● JEWEL● WAL-MART

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Low PL Share Retailers PL represents ~10% of total sales

● GIANT FOOD (LANDOVER)● COUNTY MARKET● WHOLE FOODS MARK● REDNERS MARKETS● DOLLAR TREE● ASSOCIATED● WALDBAUM● PICK N SAVE● WINCO FOODS● JUBILEE FOOD STO● VALUE CITY● CUB FOODS● FAMILY DOLLAR● FOOD 4 LESS● BASHAS● KMART● ECKERD (BROOKS ACQUIRED)● RITE AID● FOODTOWN● SUN HARVEST● DUANE READE● RAINBOW● TARGET-SUPER● DEALS DOLLAR STR● BJ'S● KMART-SUPER

● LONGS● BROOKS● FREDS DOLLAR STORE● DURSO KEY FOOD● FAREWAY● TARGET● SAM'S● C TOWN● DIERBERGS● WILD OATS MARKET● BYERLYS INC● FESTIVAL● PAMIDA● SHOPKO● SMART AND FINAL● BI MART● DRUG EMPORIUM● SNYDER'S● NINETY NINE CENTS ONLY● BARTELL● ALCO● NATIONAL WHOLESALE LIQUIDATORS● MARC'S● SAV-ON● OSCO● SCHNUCK

2006 ACN Private Label Report

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Transcript of 2006 ACN Private Label Report