Brands with more than $ 6 billion in annual sales gained 0.3% more market share this year, according to market research firm IRI, while private labels lost 0.5% from them. This is the first time this has happened since IRI started tracking such data in 2016.
Meanwhile, mid-sized brands with less than $ 1 billion in sales have stagnated. Small brands with less than $ 100 million in sales gained 0.1% market share.
While those numbers seem meager, any additional gain in the consumer packaged goods sector of nearly $ 1 trillion could make or break a company’s year.
“Big brands win”
Private label products lost 3.3% of their baby wipes market share to major brands in the 52 weeks ending Oct. 9 compared to the same period a year earlier, according to Jefferies, who follows Private label sales and market share using Nielsen data.
During this period, private labels also lost 2.6% of their share in diapers, 1.3% in pain relievers, 1.8% in vitamins and supplements, 0.8% in household items. and kitchen appliances, 0.5% in garbage and lawn bags and 0.6% in dogs. and cat treats.
The trends mark a sharp shift from private label stores to the strength of big brands since the 2008 recession.
Big brands have since refined their strategies to address vulnerabilities, said David Garfield, head of consumer product practice at consultancy AlixPartners. They have stepped up their offerings for more affordable premium product versions and sizes to reach budget-conscious customers – a break from past practices of only innovating and then raising prices,
“All of a sudden, scale is important and redundancy is important,” said Rob Wilson, managing director of LEK Consulting, which advises consumer goods manufacturers. “On the supply side, being big and being able to put products on the shelves has become essential.”
Many private labels have struggled to stay in stock during the pandemic – more than traditional brands, analysts and companies say. Manufacturing different private labels under dozens of store banners is usually more complicated than producing a single brand – say Tide – for all retailers.
When does the party end?
Consumers traditionally turn to private labels when prices go up. But prices are also rising for private label items.
Companies have also cut back on innovations and adventurous flavors to focus on producing enough of their primary products, leaving customers with fewer options to explore.
In times of disruption, “the trust factor becomes so much more important” to buyers, said Z. John Zhang, professor of marketing at the Wharton School of Business who studies prices and consumer decisions.
“The demand for quality brands and products is increasing dramatically and marginal brands are feeling the cracks. Chaotic things are happening in consumers’ lives. They don’t want more,” Zhang said.
But it’s too early to tell whether the gains from legacy brands this year are a short-term reversal based on pandemic habits or a lasting trend.
As the supply chain and workforce pressures ease, “you’ll see private labels start to make a comeback,” said Wilson of LEK Consulting.
And as prices continue to soar – IRI predicts that food and beverage inflation will rise to 8% in the first half of 2022 – which could cause consumers to tighten their wallets and seek out brands from cheaper distributor.
“People are going to trade on the downside,” said Krishnakumar Davey, president of strategic analysis at IRI.