Making the Switch

Nearly half of consumers are buying store brands in categories where they previously only purchased national brands, according to a new Private Label Manufacturers Association study conducted by GfK/Roper for publication in Supermarket News. In a telephone survey of 1,000 people (500 male, 500 female) conducted Dec. 11-13, 2009, 46% said they are buying the supermarket store brand in categories where

Nearly half of consumers are buying store brands in categories where they previously only purchased national brands, according to a new Private Label Manufacturers Association study conducted by GfK/Roper for publication in Supermarket News.

In a telephone survey of 1,000 people (500 male, 500 female) conducted Dec. 11-13, 2009, 46% said they are buying the supermarket store brand in categories where they had previously only purchased a national-brand product.

This is an increase from the 35% who had the same response in a separate PLMA/GfK study conducted in June.

The trend is supported by a separate study in May by targeted marketing firm ICOM that said 59% of U.S. consumers reported having switched to store-brand food and household products over the prior six months. ICOM is a division of Dallas-based Epsilon Targeting.

While the economy certainly plays a role, an equally strong reason is the way in which retailers have positioned their store brands as quality products that cost less than national brands, said PLMA President Brian Sharoff.

“U.S. and Canadian retailers have chosen a long-term strategy that will contribute to a permanent shift in consumer buying,” Sharoff told SN.

This approach contrasts to select European retailers who instead focus on value private label, a move that can result in only temporary private-label purchasing, Sharoff added.

Indeed, the survey findings show that consumers are responding favorably to the improvements that have been made to private label over the years, such as new package designs, creative product development and expansions that have made store brands competitive in frozen foods and other categories dominated by national brands in the past.

“Retailer commitments to improving packaging, ingredients, assortment and innovation are paying off,” he said.

What's more, more than one-third of those who have switched are pleased with their choice. When asked how store brands compare to their previous choices, 37% said store brands compared “very favorably,” up from 26% who said the same in the June PLMA/ GfK study. An additional 59% said store brands perform “somewhat favorably.”

“A consumer will often be happily surprised by what they take home when they buy the store brand,” said Sharoff.

Still, the economy is certainly influencing shopper decisions.

Close to half of the survey respondents (47%) say they believe the economy has “gotten worse.” Another 40% said the economy “has stayed the same.” Fewer than 13% see any economic improvement. This point of view was largely consistent across all demographic breakouts in the GfK study.

“Based on that, I would have to conclude that the factors favoring store brands will continue through 2010 and into 2011,” said Sharoff.

This could mean an additional big jump in private-label market share, Sharoff stressed.

When asked how the recession has affected their shopping behavior, 41% said the current economic conditions are a “very important” factor in their decision to buy a store brand. That's a strong increase over the 33% who responded the same in the June PLMA/GfK study.

“The depth of consumer concern about the recession is most striking,” said Sharoff.

The “very important” figure rose higher among consumers who regularly buy the most private label (53%), those who are recent switchers to store brands (62%), and those who shop in fewer stores (62%).

Overall, 78% of consumers said the economy was “important” vs. 74% in June.

Nevertheless, should the economy “return to normal,” an overwhelming majority of shoppers (86%) will stick with store brands.

Among other study results:

  • Almost half of consumers (48%) said they are “more aware of store-brand products than a year ago,” a jump from a MORI study done for PLMA a few years ago when 38% said they were more aware.

    The figure was significantly higher with consumers who are switching from national brands to private label in their regular categories (66%), and those who are shopping in more stores than a year ago (61%).

    Nearly one-third (30%) are buying more store-brand products than they were a year ago.

    The result was higher among consumers who buy the most private label on a regular basis (40%), those who have recently switched to store brands from national brands (50%), and those who are shopping in fewer stores (42%).

  • Some 30% of shoppers report that their regular shopping cart is filled 40% or more with store-brand products.

    The result skews higher among consumers who are switching to private label (38%) and those who say the economy has improved (40%).

  • More than half of those surveyed (51%) say they believe the supermarket where they normally shop should carry more store brands. That's an increase from June, when 46% of shoppers felt that way.

The number jumps among consumers who buy the most private label (71%) and those who have recently switched to private label in regular categories (67%).

A significantly higher percentage of consumers under 50 years of age — six in 10 — want more store brands.