Big Brands Slammed by Private-Label

02 May 2001

For the first time since the 1992 recession, private-label consumer lines are making significant inroads into the market share of the big, heavily advertised brands.

The trend has been noted by a number of industry observers, including ACNielsen, J P Morgan Securities and Banc of America Securities. The exception to the across-the-board pattern is food.

In categories such as diapers and batteries, private-label sales leapt by as much as 25% to 35%, while vigorous double-digit growth was recorded for over a dozen others during the thirteen weeks to March 24. In twenty of thirty-five categories tracked by Banc of America, private-label sales grew by at least 6%-7%.

Analysts attribute the sales surge to a number of factors beyond the economic slowdown, among them a slowing of new-product innovation, new private-label programs from major retailers such as Wal-Mart, and price hikes in paper products.

Certain low-cost detergent brands such as Unilever’s Suave and Dial Corporation’s Purex held their own against private-label competition and gained sales, as did Rayovac batteries.

Lack of genuine innovation among the big brands during the past year is responsible for the private-label upsurge, believes Banc of America analyst William Steele.

“The number one mistake I've seen,” Steele opined, “is that in order to make short-term [earnings targets], publicly held companies have cut spending behind their brands-innovation, advertising and sales promotion. These are all potentially commodity categories if you don't innovate and you don't advertise.”

News source: Advertising Age - Daily Deadline