Accenture: Store brands continue to thrive

NEW YORK — Private label is continuing to hold its own as U.S. shoppers are reluctant to return to their old purchasing habits, according to a new Accenture study.

Accenture, which conducted an online survey using a representative sample of 500 U.S. consumers in May and June 2012, found that about two-thirds of shoppers surveyed (64%) admitted that their grocery carts were at least half full of private-label products, while 39% said they have increased their purchase of store brands in recent years as a result of the tough economic times.

When it came to why shoppers purchased store brands, 66% cited that private-label products were cheaper than their branded counterparts. Additionally, more than three-quarters of shoppers (77%) said they would not decrease the amount of store-brand products they buy even if their disposable income were to return to the same level as it was before the economic downturn. On the other hand, 87% said they would buy more brand-name products if they were offered at the same price as the comparable store brand and more than half (51%) said that it would take a permanent price reduction of the brand-name product — to the same price as the store brand — to persuade them to return to purchasing the brand-name product.

Aside from price, Accenture also found that the growing perception of trust, quality and preference for private-label products also is influencing the purchase of store-brand items over brand-name ones. For instance, half of consumers surveyed buy store brands because they perceive the quality to be just as good as the brand-name equivalent; 42% buy a private-label product because they "trust" that particular store's brand and 28% said they simply prefer the store-brand product to the brand-name product. Only 9% claimed not to buy store-brands because they felt that the quality or taste was inferior to the brand-name product. These factors, Accenture notedm should be of most concern to consumer goods companies that are competing with stores for the same shelf space.

"Consumer goods companies must respond to the threat of increasing competition from store-brands as market position and profitability are at stake," said Bob Berkey, from Accenture's consumer goods and services practice. "Extreme competition between retailers and consumer goods companies can result in inefficiencies and waste for manufacturers and retailers, and undifferentiated products for the consumer. Consumer goods companies must develop a balanced strategy of collaboration with retailers in some areas and competition in others. This new dynamic — where competitors become partners — will require a considered focus from manufacturers."

Accenture also found that nearly half of shoppers (48%) believe that stores now offer a greater number and variety of store-brand products, and more than one-third (36%) see store-brand products as simply another brand on the shelf.

"Undoubtedly, uncertain economic times are a major factor in the growth of private label, but it is the increased sophistication of stores' own brands that has helped them retain customers," Berkey said. "Consumer goods companies must create a clearly defined private-label strategy that understands the unique attributes that drive preference and loyalty in their consumer, engages with them across multiple channels and creates an excellent customer experience."

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