In consumers' minds, a long-held advantage national brand name products have over store brands is disappearing — fast. Credit an extended economic downturn for a fair share of store brands' momentum, as consumers seek the lowest prices for items. The clincher, though, is not just price, but consumers' trust in their quality.
In a survey of 702 adults responsible for their household grocery shopping, a majority (59 percent) said that, with store brands, you pay less but get national brand quality. These findings are from a study conducted by Mintel and International Communications Research, fielded in August and September 2003, and issued in November, as economic doldrums continued.
Store brand foods are those sold under a retailer's private label, as opposed to items that bear a national or regional brand name, such as Nabisco. Without hefty national ad and store promotion or marketing costs, store brands offer consumers more economical alternatives to national brands, particularly in certain categories, such as cereal or cookies.
The industry is growing rapidly. The 20 best-selling categories of store brand foods accounted for an estimated $15.7 billion in sales in 2003, up 22 percent from 1998 versus 15.6 percent growth for the product category as a whole. Chicago-based market research company Mintel predicts that total retail sales of store brand foods will surge another 14 percent over the next five years. These foods represent 27 percent of the $58.4 billion in U.S. retail sales of bar-coded foods of those top-20 selling product groups — both store brand and national brands — in supermarkets, mass merchandisers (excluding Wal-Mart) and drug stores.
According to Mintel, typical store brand food shoppers tend to be young, with incomes below the norm.
The take-away: Hispanic consumers spell opportunity for retailers. Hispanics tend to cook and eat at home more than average and tend to have larger families than average. They also spend more on staples such as meat, fruit, cereals and bakery products than the average American household. These traits make them an alluring market for store brands and retailers. By marketing store-label products in Spanish, retailers may earn the loyalty of Hispanics who are not yet familiar with regional or national brands.
The future looks bright for store brands. Fully 70 percent of respondents surveyed said they wish that store brand products were available in as wide a selection as branded products. And 54 percent say they plan to buy more store brand items in the future.