Brands with more than $6 billion in annual sales have gained a 0.3% larger share of the market in 2021, according to market research firm IRI, while private-label brands lost 0.5% of their share. Shoppers have returned to the most recognizable names on the shelves. This is the first time this has happened since IRI started tracking such data in 2016.
Meanwhile, medium-size brands with under $1 billion in sales stagnated. Small brands under $100 million in sales gained 0.1% of market share.
Although those numbers seem insignificant, any incremental gains in the nearly $1 trillion consumer packaged goods sector could make or break a company’s year.
Big name brands are edging others thanks to a host of factors, as supply chain advantages, shoppers returning to trusted choices during the pandemic, private label growing more expensive, and brand’s hard-learned lessons on how to fight back against cheaper options, according to companies, industry analysts and experts on consumer behavior.
Consumers are showing a willingness to pay higher prices for food and essentials, although, it helps those wages are rising and many households still have extra savings built up from traveling less and reducing spending for other services since the pandemic started, giving them more flexibility to buy pricier items at stores. But it’s uncertain how long the power brands’ comeback will last as grocery prices surge and consumers seek out budget choices again.
BIG BRANDS ADVANTAGES
The trends mark an abrupt shift from stores’ private labels cutting into top brands’ strength since the 2008 recession.
“Big brands have since sharpened their strategies to address vulnerabilities”, said David Garfield, head of the consumer products practice at consulting firm AlixPartners. They have ramped up their offerings for more affordable versions and sizes of premium products to reach budget-conscious customers — a departure from past practices of only innovating and then raising prices.
The supply chain crisis has highlighted legacy brand’s advantages over private-label rivals. Size was often seen as a burden before the pandemic, and giant companies were slow to react to rapidly changing consumer tastes. But big brands’ deep pockets, scale and importance to retailers have become assets when supply is so constrained.
Many private-label brands have faced trouble staying in stock in the pandemic — more than traditional brands, analysts and companies say.
Retailers have been simplifying selection on shelves and focusing on keeping their most popular items in stock. That benefits manufacturers with well-known products that draw customers to stores, say analysts. “That comes at the expense of private label brands”, said Kevin Grundy, an analyst at Jefferies.
Consumers traditionally turn to private-label brands when prices rise. But prices are going up for private-label items, too.