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On June 15, 2010

Market Report: Down economy a plus for private label

While petfood shoppers continue to show strong brand loyalty, pet products have not been immune to the store brand swing

Not surprisingly, consumers' heightened value-consciousness gave private label a boost across many categories during the 2009 recession. According to BrandSpark's 2010 Best New Products Awards American Grocery Shopper Study poll, more than one-third (37%) of those who switched to store brands during the economic downturn said they will continue to purchase them once the economy recovers.

Conducted between mid-October and mid-December, the poll of more than 50,000 US grocery shoppers found that the majority completely agree or agree that "private labels are usually extremely good value for the money" (66%) and "private labels are just as good as brand name products" (59%).

Although petfood shoppers continue to demonstrate a high degree of brand loyalty, pet products have not been immune to the store brand swing. In the US mass market outlets tracked by Information Resources Inc. (IRI), private label sales rose 14% in 2009 to US$921 million, compared with a total pet supplies market increase of 5%, accounting for 27% of the market's overall dollar gain.

As in the market overall, private label accounted for disproportionate shares of the dog food, cat food and non-food pet supplies sales gains-at 19%, 18% and 119%, respectively- helping offset declining sales of branded products in the latter case. Overall, store brands increased their share of total US pet product sales from 10.4% (US$809 million) in 2008 to 11.2% (US$921 million) in 2009, gaining one share point in petfood and two points on the non-food side.

Petfood represents a little over twothirds-68% as of 2009-of US private label pet product sales in IRI-tracked outlets. Yet private label penetration is considerably deeper in nonfood pet supplies, at 16% (US$299 million) vs. 11% (US$622 million) for petfood.

Within non-food categories, private label shares range from 14% for non-dog/cat supplies to 30% for rawhide dog chews, which have been moving hard and fast toward private label for a few years now. For petfood, shares for all dog and cat food types are in the 7%-11% range except for the two relatively tiny semimoist categories, where private label is at 14% for dog and 93% for cat. Private label is also significantly stronger and faster growing in food for species other than dogs and cats, rising from 27% in 2008 to 30% in 2009.

Marketwide, the biggest store brand jump in 2009 was in the non-dog/cat supplies category, where private label increased five points to almost 14%. Conversely, the most resistant categories were dog biscuits/treats and cat snacks; store brand share declined in 2009, suggesting that even though pet owners were cutting back in some discretionary areas, they were continuing to pamper their pets with affordable indulgences featuring reassuring brand names. Bearing this out, dog biscuits/treats and cat snacks posted impressive total sales gains in 2009, rising 8% and 15%, respectively.

Will private label petfood continue to chart gains in the US market? Packaged Facts wagers yes. During the 52 weeks ending April 18, 2010, private label sales of dog food rose 10.2% compared with the category's overall 5.5% gain, and the store-brand cat food sales growth rate was more than triple that of the overall category (9.5% vs. 3.0%).

Trends in 2010 and 2011 will include value pricing and product premiumization aiming to tap into consumers' ongoing budget consciousness. We're also likely to see new spins on store brands, including in the form of licensed names that become exclusive to a given retailer-for example, Martha Stewart's upcoming PetSmart-exclusive line.

As the retail and brand competition continues to heat up, marketers and retailers will increasingly join forces in offering brands available in only a single chain or even shop-and nowhere else.

Find more

Get more market information from Packaged Facts from the Petfood Forum 2010 presentation.

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