QUESTIONS/ANSWERS
STORE BRANDS GO PREMIUM TO BATTLE INFLATION EXCLUSIVE TALK WITH IRI ON THE CURRENT STATE OF STORE BRANDS IN THE FACE OF RISING PRICES
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ore than a decade ago, the retail market faced rising prices and inflation. But amid the COVID-19 pandemic, the inflation period underway is revealing a different strategy for store brands. Previously, the strategy was to promote value brands and the lowest price possible. The current situation is revealing an opportunity to promote premium private brand products, according to Krishnakumar Davey, president, strategic analytics, IRI, who sat down with Store Brands. Here’s an edited version of the conversation:
STORE BRANDS: DESCRIBE THE SITUATION RIGHT NOW AS YOU SEE IT. KRISHNAKUMAR DAVEY: The price index continues to increase. This year it is running roughly at about a 4% increase vs. a year ago, and up about 8.5% to 9% vs. two years ago. That’s significant inflation because typically we run about two to two and a half points of inflation a year by price mix. Many large manufacturers have announced price increases, like Tyson and others, who are expected to increase prices throughout 2022 because there’s significant cost inflation. At the retail level the price increases have been 1% to 2.5% in terms of just the everyday price. SB: You mentioned Tyson, which has a branded business and a private brand business. How does that play out? 14
Store Brands
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KD: I think they have already added significant pricing in foodservice. In retail, they have said they have implemented it, but it's going to take a month for it to escalate down to the consumer, so I would assume their private label will also go up. So far this year, private label pricing has been more in the fresh, meat and deli department, but not as much in packaged goods, but that's also picking up because at the end of the day a bottle is a bottle, whether private label or branded. Right now, store brands are taking prices up about one to one and a half points below national manufacturers. Earlier, there was a lot more in fresh, but I think that's moderating. The packaged goods, the center store, is what is growing right now in terms of pricing for national brands significantly and store brands also quite a bit.
SB: How does today’s situation compare to years past? KD: We looked at the last recession when pricing really shot up quite a bit, 2008, 2009. In that period, private label, believe it or not, added about $8 billion in increase in sales, over a two-year time period, 2008 to 2010. The share grew 0.8 points and also the category grew whatever their normal growth, so they grew both from category growth but also from share growth, both in edible and non-edible. It was $3.4 billion in non-edible and the rest in edible. What happened at that time was a lot of the mass and club retailers started building private label brands so they were growing through distribution, introducing store brands in categories that they didn't have and so on, which all helped them. This time is different in the sense that there's a lot of stimulus money still in the system and the other
“So far this year, private label pricing has been more in the fresh, meat and deli department, but not as much in packaged goods, but that's also picking up because at the end of the day a bottle is a bottle, whether private label or branded.”
www.storebrands.com
9/14/21 5:24 PM
