Private Labels Gain Momentum

There is an increasing shift towards private labels, as branded products become dearer for budget-conscious consumers.

Private Label products are gaining momentum since the third quarter of 2008, especially among budget-conscious consumers in a recession struck economy. According to a survey conducted by the Private Label Manufacturers Association (PLMA) and Gfk Custom Research, 91% of the people surveyed stated that, they will continue buying private label products even after the recession ends.

More than 60% of the U.S. population considers private label brands as good as branded products, and approximately 30% rate the private label products higher than branded ones. Even retail giants like Wal-Mart (WMT - Snapshot Report) are revamping their shelves with more private label products to increase profit and store visits by customers.

Further, according to a report on private label food and beverage trends by NPD Group, 24% of the overall consumption of food and beverages are private label products (up from 18% in 1999).

Therefore, many food companies including Heinz (HNZ - Analyst Report), Sara Lee (SLE - Analyst Report), Kraft (KFT - Analyst Report), Dean Foods (DF - Analyst Report), Campbell's (CPB - Analyst Report) are facing stiff competition due to the increasing shift towards private labels.

According to the last two weeks ending March 2009, private label was growing faster than Heinz -- 14% versus 12%. Moreover, companies like Procter & Gamble (PG - Analyst Report) witnessed a decline in sales during the third quarter of 2009, and is expected to drop further during the first quarter of 2010 due to increasing private label penetration.