What is Private Label?
Private-label brands, also known as store brands, offer cost-effective alternatives to name brands. These brands encompass a range of products, from generic supermarket goods to pharmacy essentials.
As the economy wrestles with fluctuating food prices, private-label brands continue to carve out a more prominent market space, driven by consumer desire for budget-friendly options.
Why It Matters
The surge in private label isn't just about savings. It reflects consumer adaptability and a nuanced understanding of value, crucial for businesses and economists deciphering market health and consumer behavior.
The preference for private labels underscores a broader shift: shoppers prioritize value, signaling changing attitudes and economic responses. It's more than a trend; it's a strategic adaptation to current financial landscapes.
2023 Private Label Pulse
Private-label sales are on a significant upward trajectory in 2023. New figures from research firm Circana show:
Store brand sales have surged exceeding national brand sales which saw a 5.1% gain.
In a two-year view, private-label sales have risen a striking 16%, amounting to an increase of roughly $17 billion since 2021.
Private-label sales rose to $108 billion in 2023, up from $100 billion in 2022.
Private Label (or store brands) have achieved their highest sales value and volume to date.The dollar share of store brands has peaked at 18.8% in 2023, while the unit share also set a new record at 20.5%.
What this means
Private-label brands are clearly changing the game in the retail world. They're no longer just an alternative, but a first choice for many consumers. This shift highlights a growing trust in store brands for offering quality and value, reshaping shopping patterns and influencing the overall dynamics of the retail market.
Economic Impact and Consumer Choices
The impressive numbers for private-label brands aren't just about cost-saving during economic fluctuations. Circana Principal Mary Ellen Lunch suggests that as student loan repayments restart, many might be drawn towards value-oriented store brands to manage household expenses.
Sector-Specific Growth
Beverages lead the way with a 19 percent surge over the past year.
General food, refrigerated items, and private-label liquor aren't far behind, growing 16 percent, 16 percent, and 20 percent respectively.
More Money, Same Sales
While dollar values surge, unit sales for both private-label and national brands remained mostly flat. The first half of the year saw a 0.5 percent dip in store brand unit sales, while national brands fell by a steeper 3.4%.
What this means
The overall money made from sales (dollar values) of both store-owned brands (private-label) and well-known brands (national brands) has increased, but the actual number of items sold (unit sales) by these brands hasn't really grown - it's stayed about the same. Specifically, the number of items sold by store brands slightly decreased by 0.5 percent, while the number of items sold by well-known brands decreased more, by 3.4 percent, in the first half of the year.
2022 Flashback
2022 Sales Achievement: Private labels reached $228.6 billion in U.S. retail sales.
Growth Indicator: This represents an 11.3% increase from the previous year.
Consumer Loyalty: Peggy Davies of PLMA notes that customers tend to remain loyal after trying store brands.
Retailer Strategy: Retailers are increasingly innovating their products to attract more store brand enthusiasts.
Our Take
Beyond Budget Choices
Private-label brands aren't just affordable; they represent quality and value.
This shift shows consumers are increasingly value and quality conscious, not just price-focused.
Quality & Innovation
Retailers are innovating, not merely positioning private labels as cheaper alternatives, but as quality contenders to national brands.
Changing Consumer Loyalties
With national brands experiencing a drop in unit sales, consumer loyalty is shifting.
Indicates that consumers are open to switching brands based on value, not just price.
A Crystal Ball into 2024
For 2024, given the current momentum, we anticipate private-label sales to further consolidate their position. Factors to watch include:
Product Innovation: As more retailers invest in refining and expanding their private label offerings, expect to see a broader range of products and potentially, higher-tier private label brands that compete directly with premium national brands.
Supply Chain Dynamics: The global supply chain has seen disruptions over the past few years. How these chains adapt and stabilize could influence production costs and, subsequently, retail prices. This could either be a boon or a challenge for private labels.
If the current trajectory holds, private labels could potentially breach a 20% dollar share by the end of 2024. The changing landscape suggests not just a temporary shift but potentially a new normal in consumer retail choices.
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