The fact that shoppers are facing a crisis of confidence is having a profound effect on the consumer packaged goods (CPG) industry.

A key question on the minds of retailers and manufacturers is how consumers are meeting today’s economic challenges as the most shopping intensive period of the year draws near. The latest research from Information Resources, Inc. (IRI) reveals that financially-strapped American consumers across all income levels, including those earning $100,000 or more, are turning to private label as part of a money-saving strategy.

The “IRI Times & Trends Report: Private Label 2008” finds that private label continues to become a formidable force in the packaged goods industry. In fact, retailers are increasingly leveraging store brands as a key aspect of their differentiation strategies.

“With budgets strained to the breaking point, shoppers are scrambling for ways to save money,” IRI Consulting and Innovation President Thom Blischok said. “Shoppers are looking through a lens of affordability and have a re-invigorated interest in private label since the economic turmoil began. The need for affordable packaged goods solutions is high, and private label products are going a long way toward answering that need.”

Private label is performing well across channels, but drug retailers (pharmacies) are leading the way in growth. The drug store channel is benefiting from a surge in self-care brought about, in part, by difficult economic conditions. As part of their belt-notching efforts, consumers are reducing medical expenses by purchasing over-the-counter remedies rather than visiting the doctor. To extend their savings, they are turning to private label products.

On average, private label products cost about 30 per cent less than their name brand counterparts. That discount varies greatly, though, at the department level. For instance, the average private label fresh/perishable item costs only 3.5 percent less than its branded counterpart, but in the beauty/personal care department, consumers can save nearly 64 per cent versus a branded product.

Though nearly everyone purchases some private label products at some point, some 33 per cent of US shoppers are considered heavy buyers of private label goods. This represents a five per cent increase on last year.

“The evolution of the U.S. private label market has accelerated in the face of growing financial turmoil,” Mr Blischok added. “As shoppers opt out of some products and stores, they will opt into others. It is critical for the ongoing success of CPG manufacturers and retailers to not only react to, but anticipate these trends and be ready with products, assortments and store layouts that meet the shopper’s changing needs.”

Private label growth extends beyond U.S. borders. The “IRI Times & Trends Special Report: U.S. & Europe Private Label 2008” reveals that, while private label development varies across EU countries, healthy private label growth transcends international boundaries. In Spain, for instance, private label holds 32 per cent market share, posting growth of 2.4 share points versus one year ago. In contrast, Italy’s private label share is lower at 13 percent, but growth is still up nearly one full share point versus last year.

Challenging times, the report explains, have created opportunities for retailers and manufacturers. Consumers were found to still be loyal to those brands that could justify the higher cost, making brand value pivotal.

In previous downturns private label products have also raised greater interest amongst consumers but growth rates have not remained as strong in the wake of a return to more prosperous times. “An analysis of the past three U.S. recessions indicates that store brands make sales gains during times of economic weakness, but only hold onto these increases when high quality standards are maintained,” Brian Sharoff, President of the Private Label Manufacturers Association, noted.

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