12/1 The Wikinvest Daily Angle

Please add updates@feedmyinbox.com to your address book to make sure you receive these messages in the future. The Wikinvest Daily Angle - Market Insight and Commentary from Wikinvest.com Consumers Moving to Private Label Goods November 30, 2009 at 2:01 am Today's Daily Angle comes from Wikinvest Wire member Michael Panzner of Financial Armageddon. You can read thefull article on Michael's blog. It doesn’t take a rocket scientist to see that humans have a special relationship with food. Food doesn’t just satisfy a physiological need; what we eat is also affected by other factors, including psychological cravings, as well as cultural and social conventions. With this multifaceted framework influencing our choices, it’s not surprising that we end up with favorites that we have a hard time giving up. Yet that only holds true to a point. When economics intrudes, as the following Brandweek report, “Consumers Have Appetite for Unbranded Pizza, Snacks,” seems to make clear, we are forced to be a bit more flexible: In a year when consumers were looking to cut back anywhere they could, private label made inroads in a lot of categories, but took the biggest slices from segments like baby food and frozen pizza. According to a report compiled by the Nielsen Co., unit sales of private label baby foods grew 22.3 percent for the 52 weeks ended Oct. 3. (Data cited is culled from the food, drug and mass merchandiser channels, includingWalmart. Nielsen execs said that since prices have dropped from their year-ago highs, units are a better measure of private label’s growth than dollar sales. Brandweek is owned by Nielsen.) Other categories that were hard hit by private label include salad dressings and mayonnaise, snacks, and candles and incense. Overall, unit sales of private label goods rose 5.3 percent for the same period. That compares to a 2.3 percent drop for branded packaged goods over that time frame. Clearly, consumers are buying private label now more than ever, and retailers like Walmart, Target, 7-Eleven, and even regional chains like the New York drugstore Duane Reade are stepping up marketing of their private label products. This year’s rise comes after private label grew at a calculated annual growth rate of 4.5 percent over the last eight years, per Euromonitor, but the recession set off the sudden spark, said Lynn Dornblaser, director of CPG trend insight at market research firm Mintel. Much of that growth spurt, too, is coming from existing-not new-private label launches. What that indicates is that consumers are “rediscovering or discovering private label that has been on the market that they’ve never noticed before,” she said. Michelle Barry, senior vp at research and consulting firm the Hartman Group, said the food category has been hit especially hard because consumers are staying at home more and are more experimental when it comes to trying different food brands. The consumer packaged-goods industry, for the most part, has responded with marketing that plays up the value, familiarity and longtime appeal of their brands. Many of those companies now claim that private label growth is slowing. (Private label is particularly dominant in highly commoditized categories like dairy and canned vegetables and fruits, but less prevalent in segments driven by image-based marketing, innovation and emotional connect, like gum, deodorants and alcoholic beverages, per Nielsen.) Kraft, for instance, claims that it has fended off private label via value-driven advertising for its Kool-Aid, Macaroni & Cheese and processed cheese brands. “Overall, we view private label as we do any other competitor,” said Kraft rep Joyce Hodel, adding that “recently, we have seen private label growth trends slowing.” Kellogg CEO David Mackay also indicated as much during a July earnings call with analysts. “While it’s a very tough economy, we have started to see the growth of private label moderate in the U.S. and around the world. The initial spurt of growth has begun to level off,” he said. So, is the worst over? Perhaps not. The Hartman Group’s research showed that the majority of the 43 percent of Americans who tried private label products in the last year plan to continue purchasing store brands. (Starkist svp marketing and research Joe Tuza also said 46 percent of shoppers using private label said these products actually exceeded their quality expectations.) The recession, Barry said, has resulted in a long-term shift of consumer buying patterns, and shoppers “aren’t just leaving the general brands; they’re leaving their favorite brands as well.” Penny-pinched consumers, for instance, have prompted Procter & Gamble to roll out a basic version of its premium-priced Tide detergent brand. Indeed, consumers are forgoing even their favorite detergents for cheaper-priced alternatives. But Eric Schwartz, laundry care marketing vp at Henkel, which sells the value detergent brand Purex, said marketers can fight private label’s encroachment through not just marketing, but a clearly defined product positioning. “Well-positioned brands that cover the category well in terms of benefits and expectations will be far less vulnerable to private label, in good times and bad,” he said.   This email was sent to gatdemit001@gmail.com.  Create Your Account Don't want to receive this feed any longer? Unsubscribe here.