Package Design | packagedesignmag.com

(February 2010) posted on Thu Mar 04, 2010

By Jean Koeppel

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Whichever way you look at it, national brands are under threat. In supermarkets around the country, millions of consumers have shifted from the more expensive national brands to low-priced alternatives. National brands have seen, on average, one third of their loyal consumers flee to cheaper alternatives. As a result, in 2008, private label sales in food, drug, and mass merchandisers grew at nearly five times the rate of branded goods.
To big brands, the recessionary spending trend isn’t a serious threat in itself. When times are tough, people make sacrifices. The real threat, and the reason for the general paranoia amid national brands, is that unlike the recessionary switchers of the early ’80s, these switchers are abandoning national brands for private label and finding that they aren’t sacrificing much of anything. With private label today boasting low prices, improved product quality and evolved product packaging, many consumers will see no need to come back when the economy improves.
Today, private label commands an estimated 20% share in Walmart and 35% in Kroger. It’s not hard to imagine—with European markets as precedents—private label share climbing to above 40% in coming years. With margins on private label goods typically 10% higher than those on national brand rivals, retailers have ample incentive to extend their reach throughout every category in the store. And for now, retailers are transferring much of their good fortune right back to the consumer, delivering quality at a price that is on average 30% cheaper, and up to 70% cheaper, than the national brand alternatives.