National brands drive revenue growth, Acosta report finds
August 9, 2018
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Private label may be growing, but winning retailers still depend on the power of national brands, especially in the largest and most influential “destination” categories of the store, according to Acosta’s Why Brands Matter report. The comprehensive strategic analysis found that shoppers consistently believe national brands offer higher quality across categories and there are categories where they will not compromise on their preferred brand.

“Brands are the fuel that powers shoppers to make more trips, spend more per trip and stay loyal to products and channels,” said John Clevenger, managing director and senior vice president of Acosta’s Strategic Advisors Team. “National brands continue to dominate, representing roughly 80% of sales with a worth of over $558 billion in 2017, compared to $124 billion for private label brands. Private label brands are marketed by the retailer under their own brand and typically positioned as lower-cost alternatives to national brands.”

Manufacturers can set a course for success by working with retailers by using a balanced approach that leverages the strengths of branded products and making impactful decisions on investing in private label products where appropriate.

National brands lead growth

Shoppers of all ages and incomes consider private label as an option, but all shoppers still see it as a quality compromise when compared with name brand products, Clevenger said in a webcast presentation for Acosta clients. Shoppers surveyed by Acosta said that “name brands are better than store brands” in 41 out of 53 categories.

This strong preference for national brands supports Acosta Strategic Advisors’ Winning Retailer Analysis, published in 2017, that found retailers who are outperforming their peers generate most of their growth from national brands. In fact, national brand growth rates are outpacing private label in 14 of the 20 top retailers.

“Private label can be an important part of the strategy, but you can’t get where you need to without working closely with national brand partners,” Clevenger advised clients during the webcast. “Retailers that over invest in private label generally fare worse than their peers,” he cautioned.

Brand name products offer distinct advantages

Manufacturers and retailers should work together to develop a growth strategy based around the benefits of both branded and private label products. In categories where branded products are most important to consumers, manufacturers can offer several advantages, including product innovation, traffic-driving promotions and shopper marketing capabilities.

Categories in which shoppers are most likely to choose a national brand over a private label brand are those considered to be more personal or cutting-edge. Shoppers said they purchased national brands “exclusively” or “mostly” when selecting personal care products, pet food, soda, coffee and chocolate candy. National brands have the resources to innovate in these categories and get consumer buy-in for new products using shopper marketing that builds on trusted brand names.

National brands are at a disadvantage when it comes to price, but branded products can stand out from the crowd through innovation, which Clevenger said is “one of manufacturers’ few durable advantages and a place where private label will not make the investment.” He said of private label brands, “they will generally follow, as the platform doesn’t allow for innovation leadership.”

Collaboration, co-branding create additional opportunities

In categories where shoppers are less brand loyal and more inclined to opt for a private label product, manufacturers can partner with retailers in other ways.

“There may be opportunities to supply the private label product for your retailers or co-branding or co-marketing with those brands,” Clevenger said. “The ‘right’ strategy will depend on understanding two variables: how critical the category is to the retailer and shoppers’ willingness to consider private brands in that category.”

As the managing director and senior vice president of Acosta’s Strategic Advisors Team, Clevenger works with manufacturers to help them “think their way through the private label challenge,” he said. “Wherever your products compete, there are different strategies to respond, and it’s possible that Strategic Advisors could be helpful in that regard to you.”

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