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Private Label Food Products Wage Turf War with National Brands

Private Label Food Products Wage Turf War with National Brands . / Credit: Private label foods image via Shutterstock

Private label food brands sold by supermarkets and other retailers, long a shopping-list staple of budget-conscious consumers, continue to chip away at the dominance — and market share—of highly advertised national brands, according to a new report. These house brands are on track to achieve market penetration of between 25 percent and 30 percent in the next decade, up from their current market share of less than 20 percent. By 2025, one in every three food product purchases in the U.S. will be a private label product.

House brands have grown 6 percent over the last five years, compared with just 2 percent growth in sales of national branded packaged food manufacturers, according to a new report that looks at the drivers behind of the rising power of private label brands. The report was prepared by Rabobank, a financial services provider.

The increasing competitive strength of retailer brands reflects a power shift from consumer packaged goods companies to food retailers, as well as the growing trust and loyalty consumers have to today's innovative and high-quality retailer brands, Rabobank said.

"Retailer brands have matured from their original positioning as 'cheap and cheerless' generic products into a more diverse range of national brand equivalents and, more recently, highly innovative premium products," said Nicholas Fereday, a Rabobank analyst and author of the report.  "On grocery shelves around the U.S., from convenience stores to upscale supermarkets, retail brands now compete successfully and often win against national brands, earning consumer trust in terms of pricing, quality, image and value." 

Retailers have stepped up their game in brand management, Fereday added. Successful retailers have developed premium products, employ sophisticated packaging and have expanded into new categories, such as the fast-growing chilled ready meats segment. Retailers are also acting like brand managers, following a multitiered approach by offering value brands, national brand equivalents and value-added premium brands.

It's giving retailer shelves, freezers and coolers a new look; retail brands were estimated to account for nearly one-third of the new food and beverage items introduced in the U.S. last year.

Retail brands have also benefitted from long-standing consumer purchase patterns, Rabobank said. Retailer brands win on value in recessionary times and rarely ceded ground in good times. At the height of the 2008 recession, retailer brand sales grew 14 percent compared with 3 percent for national brands.

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.We're also on Facebook & Google+.

Ned Smith
Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.