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Popularity of Private Label Not Likely to Diminish

NEW YORK -- Private label, or store-brand, grocery items have become increasingly popular across many product categories, and the trend is not likely to diminish in the future, according to Bill Pecoriello, president of Consumer Edge Research.

After surveying more than 2,500 households, Pecoriello rated 90 categories of grocery products based on the likelihood of consumers to continue to prefer the private label versions as the economy improves. Milk, cooking oil, bleach, paper napkins and spices were the most popular private label items. Peanut butter, cereal and bottled water were also at the top of the "high risk" category for private label penetration, based on Pecoriello's research, which was cited in a report.

The study reinforced Pecoriello's expectation that sales of store brands will continue to rise over time, and he said what's more, economic downturns like the latest recession are not the primary factor driving the trend. Instead, it is that increasingly value-conscious consumers are recognizing a good deal when they see one, and they are happy with the quality of today's store-branded products.

"There are high levels of satisfaction when trading down to private labels from brand names. The performance is pretty good here," Pecoriello said.

In addition, private label growth isn't being driven by consumers who are struggling. According to a Nielsen study, households making more than $100,000 a year are the fastest-growing segment of the trend.

Major retailers such as Walmart and Target have made big investments to revamp the packaging and presentation of their store brands. This has helped drive more consumers to private label products inside their stores, according to the report.

In most categories, consumers have been "pleasantly surprised" with the quality of the products, said David Browne, a senior analyst at Mintel International Group. "They have something for everybody at different price points and they also offer natural and organic products," he added.

Browne said there are still "huge opportunities" for growth in private label.

Since 2007, private label market share has risen 2.1 percent to capture 17.3 percent of the total market, measured in dollars, and by 1.9 percent to a 21.9 percent share of the market, in units, according to market research firm Nielsen.

Brand names, however, still controlled 82.7 percent of the dollar market share in March, according to the Nielsen research, while holding 78.1 percent of the unit share.

"There's some information that there's a gradual move back to name brands and that the private-label growth is slightly diminishing," Browne said. "Name brands are becoming much more aggressive and spending more on promotions and discounts."

The key factor may be performance. Pecoriello's survey showed consumers are not satisfied with store-brand trash bags, liquid cleaners, disposable razors and batteries. Other categories that have a low risk are energy drinks, tobacco, candy, and wine and spirits.

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