Branded Versus Private-Label Consumer Staple Products: The Battle Continues

Does the proliferation of private-label consumer staple products (CSPs) signal the beginning of the end for branded consumer product companies? In this commentary, Morningstar DBRS examines the growing penetration of private-label CSPs globally, and the implications thereof for manufacturers of branded CSPs and grocers.

Key highlights discuss how
-- Sales of private-label CSPs are growing as global consumer purchasing power is still squeezed.
-- Private-label CSPs have become brands themselves, benefitting from grocers' investments in product innovation, branding, and packaging and marketing.
-- Grocers are using data-driven insights to manage their merchandising mix of branded and private-label CSPs to meet customer needs and demands and maximize profits.
-- Branded products still dominate the CSP industry and grocery shelves as they are an integral part of grocers' merchandising mix to drive store traffic.

"Notwithstanding the growing popularity of private-label CSPs, their branded counterparts continue to generate the lion's share of sales in all grocery departments," said Aarti Magan, Vice President - Corporate Ratings, Diversified Industries, "We believe that grocers will remain incentivized to balance the growth of their private-label portfolio while maintaining collaborative relationships with the key brands that drive traffic to their stores. These dynamics, combined with brand reputation, ongoing research and development, product tiering, and advertising and promotions of branded CSPs, should stand the credit-risk profiles of larger consumer product companies in good stead."