Since the recession began, private label has become a major threat, biting into food earnings among companies like Kellogg and Kraft. Now, with signs of an economic recovery on the horizon, price increases abating and consumer confidence on the rise, sales of store branded products—though still growing—are tapering off, analysts say.
Unit sales of branded goods dropped steeply during the first four of six (4-week) periods ending May 16. The fourth period posted the sharpest drop, 7.2 percent, but reverted to 2.2 percent growth as consumers bought national brands during the Easter season. (The sixth, or last period in that Nielsen Scantrack cycle, which includes Walmart sales, posted a one percent drop, but still better compared to the earlier declines of 3.8, 4.7, 4.3 and 7.2 percent, respectively.)
Moreover, in a research note published May 29, J.P. Morgan food analyst Terry Bivens wrote that private-label share gains, while up on a year-on-year basis in most categories, “remain relatively steady” rather than growing quickly as they had previously.
At least one food marketer is expressing some relief. In Heinz’s fourth-quarter earnings call last month, CEO Bill Johnson noted: “Private [label’s] growth, while still a major concern, does appear to be easing somewhat, albeit at higher sustained share levels.”
Indeed. While most of the nation’s largest food purveyors aren’t dropping their guard against private label anytime soon, certain socioeconomic and market factors are lessening private label’s menace—if only a bit. The Congressional Budget Office, for instance, now expects an official end to the recession by the second half of 2009—and that’s without the trillion-dollar stimulus.
Though consumer confidence and the economy go hand-in-hand, Matt Arnold, a food analyst at Edward Jones, argued that perception aside, not much has really changed.
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