Promo Watch: Creating a balanced approach to store brands

The growth of store brands continues to outpace national brands. However, there is a role for both national brands and store brands at retail. Today, many retailers and manufacturers are struggling to understand what is the right combination of national brands and store brands, what should the price gap be between the two and how do the various national brand and store brand strategies impact the retailers’ total gross margin, market share and category growth.

DSN has partnered with Competitive Promotion Report and IRI to create a series of exclusive reports. This month the analysis explores national brands and store brand optimization to better understand how the retailer can create a “balanced” approach to national brands and store brands that drives overall business results. In this analysis, we looked at the major national brands and store brands in the drug channel for the laxatives tablets category over the past two years. The following are just a few of the key findings from this study:

  • The average price gap percentage between store brand and national brands for the category at a little more than 10% is lower than expected, but has been trending up over the past two years;
  • In most cases, as the average price gap between store brand and national brands increases, total gross margin decreases and the overall category growth rate declines;
  • Additional store brand SKUs did not drive proportional increases in margin dollars;
  • As might be expected, average retailer margin percentage was highest for store brands at 58%, followed by the national brands at 45.2% (Colace), 41.4% (Dulcolax), 40.2% (Ex-Lax), 39.1% (Phillips) and 21.9% (Metamucil).
  • The retailer margin generated by store brands in this category ($186 million) is more than double the retailer margin of the top five national brands combined, yet there are opportunities for growth in the category with the national brands;
  • Store brand average percentage of promoted units consistently is higher than national brands, with the gap between the two widening over the past year;
  • Although Phillips has the lowest overall market share of the five leading national brands at 2.9%, store brand dominates the category at 46.8%;
  • Phillips, Colace and Dulcolax have shown the greatest average annual market share growth at 6.7%, 3.9% and 3.6% respectively, while store brand is at 1.4%; and
  • The average percentage of units on promotion by brand for store brand at 38.5% is almost double that of Dulcolax, the highest national brand at 20.9%.
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