$55 Billion in Sales Could Shift to Store Brands, McKinsey Study Predicts At Private Label Trade Show in Chicago

Nov 13, 2007, 00:00 ET from Private Label Manufacturers Association

    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
     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.

SOURCE Private Label Manufacturers Association