So, to repeat, my thesis, PL has been growing and will grow at the expense of its branded competitors. Further, this is not a temporary phenomenon but rather a "new normal" as shelf space and cold case spots are likely lost forever in many categories, especially in categories where no PL existed prior to the crisis. So do not get lulled to a comfortable haze when company X tells you how many "billion-dollar" brands they've got.
I decided to write a new article, rather than just an update, because Brandweek released the top growth categories for private label over the last year, and the results are very, very interesting.
So, the #1 growth category is Baby Food. Think about this for a moment. Most new parents do not take chances with anything when it comes to the baby. Nothing but the best for junior. Baby food brands are heavily marketed to new parents, with their special ingredients and superior taste. And yet, parents are overwhelmingly going for the PL products! This is not daddy going for Busch instead of Bud or Mommy going for no-name crackers instead of Wheat Thins. This is mommy going for the cheapest baby food options. A "new normal"? Quite possibly.
Also note that PL baby food sales are tiny as an absolute number. You can bet this will be growing. Especially since this is not a traditional PL category, more and more chains will be adding their own PLs as acceptance grows. Call it a "network" effect of sorts. Additionally, baby food is a very high-value add product with complex, regulated manufacturing.
The #2 growth category is frozen pizza and snacks. This comes despite a huge advertising push for DiGiorno ("DiGiorno-mics" or something, with a strong value message). Again, this is not a high PL penetration category normally. This is usually the domain of high-value added, complex branded products, with several pizza restaurant brand extensions thrown in for a good measure. Frozen snacks, like pizza rolls, are even harder to make. And, yet, PL is hitting it hard. Freezer space is even tougher to get than regular shelf space, so think again what are the implications.
The #3 growth category salad dressings, mayo and toppings. I personally see no reason why PL penetration here has not been higher. Dressings are sold based on how close to the "average expectations" their taste is. No reason why a major shopping chain would not have its own, delicious mayo and top 5 (my estimate) dressing flavors: italian, ranch, thousand island, caesar + vinaigrette of some sort.
In summary, what is this "telling" us? One, extraordinarily wide acceptance as consumers are going for PL even for their babies. Two, high-value added, complex products are the next PL target. Three, branded sales in many categories are likely permanently impaired.
Who are the big non-winners here? The top branded baby food guys are: Mead Johnson (NYSE: MJN), Abbott Labs (NYSE: ABT) and Nestle (OTC: NSRGY).
The big branded frozen pizza players are Kraft (NYSE: KFT), Schwan (Private), Nestle, and General Mills (NYSE: GIS).
The branded mayo companies are Kraft and Unilever, dressings again Kraft, Unilever and Clorox.
Obviously, don't go and short these companies just because they have lost share in these categories. They are all very well diversified and operate internationally, while this data is US-only. But the data is something to keep in mind in aggregate.
I already wrote about the publicly traded PL guys before, so no need to repeat it here. Also, you see what I describe strictly in food, bev and some OTC. This does not extend to all brand-centric companies. The data is much harder to come by in areas like clothing (specifically, "compression wear", I was successfully short UnderArmour at one time) or other places.
Update 1 12/01/2009: Here is an interesting story from Reuters. CVS is dropping Energizer alkaline batteries, and will instead have only Duracell and... you guessed... private label. "The move comes as CVS and other retailers work on trimming the variety of products they sell to make it easier for shoppers to make decisions on what to buy." Guess whether the retailers' own brands will stay on the shelves. "Last month, Deutsche Bank analyst Bill Schmitz said he expected retailers to make shelf space decisions over the coming weeks." Who's likely to win here? For my non-NA reader, CVS is a major US-style pharmacy chain with 7,000 stores (they also have a pharmacy benefit manager business, and quick clinics business). I guess I can add batteries to food and OTC medicals as a PL-category. Batteries are overmarketed and I read somewhere that consumers are unable to judge the quality at all.
Update 12/11/2009: Here is something from the McKinsey Quarterly. Even though this is only a part of the full article, the gist is clear: