$55 Billion in Sales Could Shift to Store Brands, McKinsey Study Predicts At Private Label Trade Show in Chicago
CHICAGO, Nov. 13 /PRNewswire/ -- $55 billion in annual supermarket sales could shift from national brands to store brands if the aggressive private label strategies of several large, high-performance retailers are emulated by other major chains. The projected shift was outlined by McKinsey & Co. in a breakfast presentation today at this year's private label industry trade show in Chicago. It is based on a study completed by the consulting firm entitled "New World of Brands: The Next Wave of Private Label." Kari Alldredge, a Principal at McKinsey, and Matt Spanjers, an Associate Principal, delivered the findings. Brian Sharoff, President of the Private Label Manufacturers Association (PLMA), which has organized the trade show for nearly 30 years, called the McKinsey report "astounding" and said that it is one of the few studies that correctly analyzes the impact that cutting-edge retailers are having on the supermarket industry. "What we are seeing today is the transformation of food retailing from regional and local grocery chains to national supermarkets, supercenters, warehouse clubs, and specialty gourmet chains that are committed to making their own brands into nationally-known brands. And they are succeeding beyond anyone's estimation," said Sharoff. "The launch this week of Tesco's new Fresh & Easy stores in California is one more indication of this trend," Sharoff said. In the McKinsey study, the private label capabilities of more than 70 retailers were analyzed and several trading partners -- national brands as well as private label -- were interviewed. The report identifies retailers who "have successfully used private label as a key differentiator and to build consumer loyalty." According to the research, "the bulk of retailers" are lagging behind. If, says McKinsey, these lagging chains begin to emulate the private label share leaders and pump up their store brands to drive growth and build consumer loyalty, it could result in $55 billion in annual sales migrating from national brands to private label in categories across the store. A shift of this magnitude is consistent with the experience of store brands in Europe, according to McKinsey. "In the 1990s, as many European retailers began to understand the impact that private label could have on their business, private label share more than doubled in several major markets." The report singles out Tesco, the U.K. retailer, which increased its private label share by three percentage points annually from 21% to 34% over four years. The success of private label in Europe has definitely made an impression on U.S. retailers. "In our interviews-and in public statements-current share leaders and private label 'up and comers' share the aspiration to reach dollar share levels and growth consistent with the European leaders," the McKinsey report concludes. The McKinsey study is also buttressed by recent consumer research commissioned by PLMA and carried out by Ipsos-MORI, a well-known international market research firm. Their report showed that 41% of shoppers in the U.S. now identify themselves as frequent store brand shoppers, up sharply in recent years. The research also found that consumers are now more aware of store brands and more likely to buy store brand products than ever before. Reflecting the growth in private label, this year's PLMA trade show presented more than 2,000 exhibit booths exhibiting the latest private label products, packaging and promotional ideas in categories ranging from fresh, frozen and refrigerated foods, snacks and shelf-stable groceries, to health and beauty, household and kitchen products, paper and plastics, general merchandise, consumer electronics, home/office and DIY. Founded in 1979, the Private Label Manufacturers Association has more than 3,000 member companies worldwide. Trade shows and conferences include PLMA's "World of Private Label" International Trade Show which is presented in Amsterdam each Spring. https://profnet.prnewswire.com/Subscriber/ExpertProfile.aspx?ei=62552
SOURCE Private Label Manufacturers Association
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