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How Private Label Gains in New Products Contest

How Private Label Gains in New Products Contest

Retailers are finally getting what they asked for.

For years they complained about a flood of new product introductions. That flood is now beginning to recede, sparked by retailer SKU reductions and a decline in new product launches from smaller manufacturers.

That's the assessment from Lynn Dornblaser, director, CPG Trend Insight, Mintel International Group, who keynoted a session at the FMI 2010 show this month.

Mintel data shows that U.S. new product introductions across all retail channels fell 20% in 2009 after shooting up 23% between 2006 and 2008. The 2009 decline was paced by reductions in consumables.

The new products picture, however, is about more than just declines. It's also about a bigger contribution from private label, including products geared to value, premium and personal care. While private-label launches also fell last year, they did so at a slower rate than brands. In fact, private label's share of all new products rose from 16.6% in 2006 to 24.7% in 2009, according to Mintel.

Store-brand momentum at retail is expected to continue, although market share won't reach the outsized levels seen in Europe, Dornblaser forecast.

Lots of reasons have been suggested for rapid private-label growth, and Dornblaser submitted an explanation that hasn't been widely circulated yet.

“There's less loyalty to brands, because benefit loyalty is replacing brand loyalty,” she said. “Consumers want their needs met. If PL can respond, consumers are less likely to go back to brands.”

All of this creates challenges for national-brand manufacturers. Are there strategies they can employ to position themselves better? First, consider that private label is actually going through a bit of a transition itself. Retailers are trying to determine the best mix between value-oriented and benefit-oriented private label, Dornblaser said.

Transitions in private label could be good opportunities for national brands to make inroads. There are few better times than now because the reduced number of overall new products means less competition.

There are some big trends that represent pockets of opportunity for both brand and store-label manufacturers, which Dornblaser outlined:

• Simplicity: Marketers are simplifying consumer choices, including easier-to-understand labels and packaging with fewer numbers of ingredients.

• Sustainability: Consumers are becoming more proactive about this trend, as long as it doesn't lead to more costs for them.

• Value: This trend isn't just about low-cost, but also about offering quality, durability and consistency.

• Clear Communication: Accountability and transparency are no longer differentiators, they are requirements.

These trends should help point the way for marketers of brand and store-label products to pursue innovative new items that have big impacts on their categories. Those are the types of launches that almost always do well.

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