Private labels gain market share in the US

By Simon Pitman

- Last updated on GMT

Related tags: Private label, Marketing

The current economic downturn in the US may be increasing the
market share of cheaper priced private label products, according to
a Citigroup analyst.

The latest data on spending patterns for household and personal care goods indicates that the consumers are shifting away from pricier brand-name products as their spending power diminishes. The market shift may be a result of a number of factors, according to a research report authored by Citigroup analyst Wendy Nicholson, including improved quality of private label and store brand products. Private labels tapping into trends​ Likewise, private labels have done more to tap into key consumer trends, such as naturals and anti-aging, giving them broader appeal to the highly discerning consumer that characterizes this segment. This, combined with the fact that quality has improved significantly, has gone a long way to help improve the consumer perception of private label personal care goods, which were once thought to be of inferior quality and lacking in choice. But perhaps most important in the current economic conditions is the price tag, with the Citigroup research report suggesting that the average price difference between private label and brand-name products in this category is currently 21 percent. Consumers like private label prices​ In her research report, Nicholson says of the sudden leap in private label market share, "We can't help but wonder if this is coming in part from the price rises that manyHPC companies have taken". ​ According to Citigroup's estimates, the average weighted market share of private label personal care and home care products increased by 0.5 percent for the four week period ending May 17. Likewise, the index for the month up to April 19 showed an increase in average weighted market share of 0.7 percent. Market share trend increasing​ Nicholson told Reuters that this growth rate for private labels was slightly up on the year-to-date average, which came in at 0.4 percent. According to the Citigroup research report, private labels currently account for 11.4 percent of total personal care and household sales in the US. However, despite the size of the market share still being relatively small, Nicholson says she believes the most recent market gains are significant. Market gains caused by tough conditions​ This is particularly true in view of the stagnant nature of the personal care market in recent years, suggesting that because any market gains are coming in the face of extremely challenging conditions means they are significant. "Given the broad-based price increases that our companies continue to announce, coupled with higher gas and food prices, we generally worry about the health of our categories in the U.S,"​ Nicholson said in the research report. " As such, we continue to prefer those companies with the most significant exposure internationally, in particular to emerging markets - such as Avon - or those companies for whom the threat from private label competition continues to be very small - such as Estée Lauder."

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