Published this month by Planet Retail, Private Labeling in North America: Fertile Ground for Growth values private label sales at the top 30 groceries at more than $150bn, representing 21.6 percent of total grocery sales.
By 2014, this figure is expected to leap 40 percent to $209bn, accounting for just over 21 percent of total grocery sales – and led by Walmart.
“The relaunch of Great Value combined with the effects of its SKU rationalisation programme has led to improved visibility of private label, resulting in an increase in category sales. In the US, the Great Value line alone generates $12.5bn in sales. We expect this to increase 60 percent by 2014, making it a $20bn brand,” said Natalie Berg, Planet Retail’s, global research director.
“Looking to the future, the effects of SKU rationalisation and the emergence of new discount formats will continue to breed private label growth in North America. Increased competition from private labels will require genuine innovation from brand manufacturers,” she said.
According to Planet Retail, its report is equally valuable for retailers as for their suppliers, as it sets out key trends driving private label, which provide insight into the future strategies of grocery retailers.
Private label leaders
The top three retailers in terms of private label sales in 2009 are Walmart, Kroger and Aldi, which generated category sales of $32.4bn, $19.6bn and $10.2bn respectively. Between 2009 and 2014, compound annual growth rates for private label sales by the three retailers are forecast to be 8.9, 4.5 and 8.4 percent respectively.
Costco and Safeway hold positions four and five, with sales of $9.3bn and $9.1bn in 2009 respectively, and CAGR to 2014 estimated at 8.4 and 10.4 percent.
Other leaders in the top ten list include: Loblaw, Target, SuperValu, Publix and Anhold.
According to the report, Walmart’s lead is no surprise, despite the fact that it has traditionally been the national brands that feature heavily on its shelves. On the other hand, Aldi is highlighted as a key player on the ranking, where it holds third place compared to its positioning as 19th in terms of overall sales.
“The retailer, which includes the Aldi and Trader Joe’s banners, places a much stronger emphasis on private label than its peers, leaving national brands to make up just 15 percent of sales,” writes the report.
“As a result of aggressive expansion plans, Planet Retail predicts that by 2014 Aldi will generate $15bn in private label sales, approximately the size of H-E-B’s entire business today.”
In general, private label growth will be driven by new discount formats including Joe V’s by HEB and Sobeys’ FreshCo.
“Hybrid drugstore/supermarkets such as the Rite Aid/Save-A-Lot partnership will also look to private label as a means of differentiation in both food and HBC categories,” predicts Planet Retail.