INDUSTRY OUTLOOK BY GE ORGE PU R O, P R ESI D EN T , P URO RESEA R C H GR O U P
Private Label in an Era of Uncertainty Private brands have seen a lot of ups and downs in recent months. In this column, we look back at recent private label trends and what we might expect in the future. WILD RIDE Private label has had a wild ride since the beginning of the pandemic, perhaps best exemplified by the picture of a rollercoaster the PLMA used on its most recent state of the industry report. In the early parts of the pandemic, private label sales saw a huge bump. In March 2020, according to IRI data published by the PLMA, private label dollar sales jumped 37% in the U.S.. In May 2020, sales jumped 21%. In fact, 2020 as a whole was a banner year for private label, with store brands (12.3%) outpacing national brands (10.2%). With pandemic restrictions easing in 2021, at least for parts of the year when there wasn’t a new variant to deal with, retail gains were much smaller than the year before, but more in line with historical trends. Store brands were up just 1% for the year, compared to 2.7% for national brands in 2021, according to IRI data. The story was even worse though in terms of unit sales in 2021. Store brands declined 4.5% for the year, a steeper decline than national brands’ loss of 1.8%. Private label has continued its growth in the early weeks of 2022, per data from PLMA/IRI. As of February 20, 2022, private label dollar sales increased its share of total store sales in the U.S. to 18.1% Private brands had ended 2021 with a 17.7% share. In terms of unit share, private label increased its share to 20.1%, up from 19.6% at the end of 2021. Both trends bode well for a strong year for private label. And retailers continue to focus on their own brands. Target, for example, debuted a home organization brand called Brightroom in January 2022 with over 450 items at launch. The company grew its owned brand sales 18% in 2021 to more than $30 billion.
WHEN PRICES RISE In times of inflation or an unstable economy, consumers have historically leaned more heavily on private label. Data from the U.S. Bureau of Labor Statistics showed that inflation in 2021 was the worst it has been since 1982. The Consumer Price Index (CPI), which measures the average price change over time of a market basket of consumer goods and services, was up 7.5% in 2021 compared to the year before. January 2022 numbers were no better, with the CPI rising 0.6%, beating Dow Jones expectations of 0.4%. Europe has also seen high inflation, with inflation reaching 4.6% in the fourth quarter of 2021 and expected to reach 4.8% in the first quarter of 2022, according to data released in early February by the European Commission. Times of high inflation or economic distress – such as the 1970s or 2008 – have often benefited private label, as consumers have looked for ways to cut costs. But today’s private brands are different than they were historically. Store brands are often of equal or better quality than national brands. While consumers might consider trading down on price, they won’t necessarily be trading down on quality.
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GLOBAL RETAIL BRANDS / MARCH 2022
