Long-Term Growth Trends in Private Label Market Shares

Overview: Research has shown that most consumer product markets are in long-run competitive equilibrium. In most categories, a given brand’s market share is stationary, showing remarkable stability over long time horizons (10 years). This empirical generalization has been attributed to both consumer inertia and competitive reaction elasticities that lead to offsetting marketing spending which nullifies attempts by one brand to take unilateral action to increase share. Despite consumer inertia and competitive matching, it is found that during the period 1987-94 one brand consistently showed positive market share evolution, the retailer’s own brand, the private label. In 225 consumer packaged goods categories, private labels trended upward 86% of the time. To provide some insight into these empirical findings, an analytic explanation for how private labels can grow even though national brands exhibit no growth on average, is developed. It is argued in the paper that this can occur because unlike its national brand competitors, the retailer through its private label is the only brand that not only controls its own marketing spending but also exerts some influence over the ultimate marketplace spending of their national brand competitors.

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Format: PDF | Size: 114KB | Date: Jan 2003 | Pages: 28