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Store Brands Flex Muscle in Weak Economy

NEW YORK -- Store brands outperformed national brands in the United States on an average unit sales growth basis and have posted gradual gains over time in this country and many European countries, according to Nielsen research.

Indeed, heavy store brand buyers are good for sales overall, leading the charge on unit growth, unit spending and trip frequency criteria, Nielsen found. Store brands have won favor among younger households, boding well for long-term private label brand prospects.

Prompted by belt-tightening as consumers respond to the long-tailed economic downturn, store brand offerings posted value or currency share gains in two-thirds of the 21 European and North American countries Nielsen studied, picking up an average of 1.3 share points during 2009. The U.S. trajectory was more pronounced, with store brands advancing to a 17.3-percent share of dollars and a 21.9-percent share of units by March 2010 -- up 2.1 and 1.9 points, respectively, from 2007.

Branded products, however, still drive the vast majority of dollar (82.7 percent) and unit (78.1 percent) sales, Nielsen reported. Branded offerings demonstrated consistent, gradual improvement over the last half of the year. During this time, store brands' average period unit sales grew by 2.5 percent, while brands realized incremental growth of 0.4 percent. Increases in promotional support behind branded products helped stabilize a declining trend.

Store brands demonstrated their power by capturing a 20 percent unit share or higher in 48 of the 117 categories analyzed by Nielsen. Store brand share fluctuated widely by department from a high of 40 percent for the dairy department, to a low of less than 1 percent for alcoholic beverages. This mirrors the typical pattern of store brand strength in commodity categories such as milk, eggs and sugar, as well as those with little "consumer-perceived" differentiation such as first aid or wrapping materials, the firm noted.

In categories with a history of strong brand marketing support like beer and candy, or those with a high demonstrated level of innovation such as deodorants and detergents, store brand share remains relatively weak and undeveloped, according to Nielsen. The low-hanging fruit for store brands involves cherry-picking sales at the expense of smaller brands with commensurately smaller marketing support budgets.

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