Report: Private Label Could Erode National-Brand Sales

As major retailers increase their store-brand focus, their efforts could help catapult private label to an unprecedented 24% dollar share by 2016 and result in $55 billion in annual sales going from national brands to private label, according to a McKinsey & Co. report to be discussed tomorrow at the Private Label Manufacturers Association’s annual trade show.

CHICAGO — As major retailers increase their store-brand focus, their efforts could help catapult private label to an unprecedented 24% dollar share by 2016 and result in $55 billion in annual sales going from national brands to private label, according to a McKinsey & Co. report to be discussed tomorrow at the Private Label Manufacturers Association’s annual trade show here. “New World of Brands: The Next Wave of Private Label” studied the private-label initiatives of more than 70 retailers and interviewed several national-brand and private-label suppliers. The report identifies several key retailers that “have successfully used private label as a key differentiator and to build consumer loyalty.” These retail leaders have an average private-label dollar share of 22%, well above the industry average of 16%. Moreover, these “share leaders” have posted higher levels of overall sales growth versus non-leaders: 5.3%, vs. 3.4% over the past three years. McKinsey calls the difference between industry average private-label market share and best-in-class as “value at stake.” The report suggests that “if retailers do go after the value at stake,” it is possible that store brands’ dollar share could climb to 24% by 2016.

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