When a bad economy causes the belt around the family budget to tighten, among the first frills eliminated are usually premium-priced, nationally-branded grocery products. Private label (PL) products—sometimes referred to as store brands—are billed to be more budget-friendly alternatives that are equal in quality. Many retailers, especially those in the mass market segment, carry their own lines of herbal and dietary supplements. The consumer perception of PL supplements is mixed and largely dependent upon the type of supplement bearing the lower price point.
“PL’s continue to advance…while in the past, many store brands were made up of ‘the basics’ (e.g., vitamins, minerals), retailers compete with their own brands of bone formulas, herbal extracts, and even homeopathics,” commented David Browne, senior analyst, Mintel International Group, Chicago, IL. “Retailers also are making it easier to compare the PL’s to the name brands as well."
According to Mintel’s Vitamins and Minerals-U.S.-September 2009 report, retailers are increasingly ringing up sales for PL supplements. “In terms of sales of vitamins and minerals alone, private label brands collectively increased sales significantly in the 52 weeks ending June 14, 2009; most likely because consumers who do not wish to forego using supplements, but are feeling the pinch of tightening household budgets, switched to private label as a means to save money,” explained Mr. Browne. “Private label grew more than 9% in 2009, for sales of $733 million and 26% share. This growth slightly outpaced the total vitamins/minerals market growth during the same time (nearly 9%).”
The primary reason behind the growth of PL supplements, the report said, is due in part to mass retailers’ realization “that recession-conscious consumers are using supplements to stay healthy and avoid sick days,” which then prompted the retailers to “[build] up their range of offerings” and push “private label and store brand products to attract value-conscious users.”
Many private label products are contract manufactured by the same companies who produce nationally branded products, observing the same quality standards. While that is fine for items like glass cleaner and baby wipes, what about dietary supplements?
“Consumer perception appears somewhat cautious, considering the fact that, for example, even in a sector like vitamins and minerals—only three in 10 vitamin/mineral users use store/private label brands, which may point to a lack of brand loyalty, or ongoing confusion among consumers about which brands are best, if any, or both,” pointed out Mr. Browne.
Certain supplement categories also appear to resonate more with consumers and in some cases, a product’s claim can carry more weight. “When consumers shop for more complex ‘structure/function’ products such as a weight loss or joint pain formula, they are likely easily overwhelmed in the purchase decision, and rely on name brands that they’ve at least seen ads for, or had family/friend recommendations for,” said Mr. Browne.
The PL supplements that typically tend to enjoy the most success at market are the “safest” in terms of consumer recognition—multivitamins, individual letter vitamins, calcium, and the like. “Consumers and [retailer] staff alike are more likely to think these supplements are identical, no matter what brand,” commented Mr. Browne. “Interestingly, the most expensive supplements (often proprietary formulas from name brands) are often the types that consumers are willing to spend on because they trust that these formulas are worth paying for.
“A PL version may compete tremendously on price, but consumers are likely somewhat wary,” he added.
Mintel’s research suggested that the PL supplement category benefited substantially from the fact that consumers, though unwilling to give up supplements, aren’t shy about demanding affordable alternatives to name brands.
An interesting wrinkle about the PL consumer was uncovered by Nielsen, which found that the growth of the PL sector overall is less driven by budget-minded consumers and more driven by consumers making more than $100,000 a year—a wildcard factor that could play into the PL sector’s favor when the country’s economic situation finally stabilizes.
Despite the higher standards demanded by consumers hailing from across the economic spectrum, Mr. Browne said that this call for products that suit unique dietary needs and help address specific conditions will likely translate into more success for name brands, with retailers only creating private labels once there’s an established mass of interest from the consumer perspective.
Nevertheless, he said PL brands will likely experience a slight increase in market share and grow faster than the market as a whole, but that growth will be incremental.
“Mintel expects that the PL market will be helped by innovations that consumers don’t know are store brands—allowing retailers to offer different tiers of supplements (value, premium) if their customer base is interested, while also attracting consumers that may be suspicious of quality when it comes to supplements,” said Mr. Browne. “Also, some consumers have certainly traded down to PL brands during the recession in order to continue taking supplements. Some may have been happy with the results, meaning they won't trade back up to name brands unless the value equation is right.”