"With the exceptions of drinks and personal care products, most consumers believe that private label options are of equal quality to nationally-branded products," says Fiona O'Donnell, senior analyst at Mintel. "The lack of perceived difference can be attributed, in part, to the fact that many retailers have introduced premium private label products in recent years that rival their branded counterparts in flavor and nutritional value, as well as the packaging design and shelf placement."
In fact, 62 percent of consumers believe there's no difference in quality between name and store brand dairy products, 61 percent find no difference when it comes to canned or shelf-stable food products, 60 percent usually or sometimes purchase private label bread or baked goods and 58 percent usually or sometimes purchase store brand cheese.
The Battle for Brands in a World of Private Labels, which looks at strategies consumer packaged goods companies are taking to help compete, found: 77 percent of CPG executives and 90 percent of retail executives indicate that market share of store brands are going to increase or increase significantly in the U.S. by 2012; 85 percent of consumers indicated that they have found several store brands that are just as good as national brands and as a result have little reason to switch back; and Fewer than two out of 10 executives believe consumers view store brands as likely to be manufactured by the traditional national brands, however eight out of 10 of 2,077 household shoppers surveyed during Deloitte's 2010 American Pantry Study believe that most store brands are manufactured by the traditional national brands.
"Though conventional wisdom has co-branding between retailers and CPG companies as a win-lose proposition, the results of our study indicate that nearly half of retail and CPG executives agree that working together may be the best way to win the wallets of the 'new consumer,'" said Pat Conroy, vice chairman and Deloitte's U.S. consumer products practice leader. "What they need to consider are variations on current brands and what new innovations should be brought to market so as not to overwhelm an already substantial marketplace."
There is a fine line that needs to be followed by both CPG companies and retailers as both sides believe consumers have unique associations with national brands compared to store brands. While price and product performance are table stakes, the executives surveyed feel consumers are much more likely to associate innovation with national brands, and local variants, such as taste and specific regional preferences, with store brands. Those areas that the executives felt consumers did not have either a strong national brand or store brand specific association were: exclusivity, green (organic and environmentally friendly) and supportive of social causes.
It comes as no surprise that the executives surveyed believe that retailers are more focused on store brands, premium offerings and building customer loyalty, and that they believe CPG companies should be focusing more on store brands. However, they also believe that consumer packaged goods companies need to develop retailer-specific portfolios and more low-end brands. Furthermore, most retail executives surveyed believe that national brands would increase market share if they created local variations to better appeal to consumers in target cites, states, or regions.