Private label accounts for 18% of total packaged-goods unit sales, up from 15% five years ago. Loss of share and volume at branded companies has fueled recent reports from three securities analysts, who predict private label will grab 30-45% of the market before peaking in the next decade.
"The bottom line is that private label is here to stay," said Stephen Carnes, food analyst at Piper Jaffray Inc. "The branded manufacturers better wake up or risk losing business to other manufacturers."
Nestle and Heinz have been leading suppliers of private label for more than 20 years. Kraft, Borden, Dole, Philip Morris and R JR Nabisco have more recently joined the game. And in recent weeks, Keebler began talks with supermarkets about a line of salty snacks and cookies in conjunction with its new private-label sister division, Bake Line.
Consumer demand for private label is a secular, not a cyclical trend, warned Morgan Stanley analyst Brenda Lee Landry. Improved product and the growth of discount retail outlets is driving the industry.
On a long-term basis, innovative new products supported by direct consumer advertising are still the keys to success for branded companies, said analyst Gabe Lowy of Gruntal & Co. But going private will be inevitable for many branded companies struggling to maintain volumes.
Copyright Adweek L.P. (1993)