P&G Loses Traction as Private Label Makes Gains
CPG company
Procter & Gamble reported a 5% dip in
global sales volume for its Q3 2009 (ended March 30, 2009), and analysts predict earnings per share may drop 5% in Q1 2010 (starting July 1, 2009), according to
MediaBuyerPlanner.
Procter & Gamble, which is losing market share in 60% of its U.S. product categories and also experiencing losses in Western Europe and Japan, has been repackaging and repricing some of its core brands. For example, the company now offers a $1 tube of Crest brand toothpaste.
While Procter & Gamble has not publicized how or to whom it is losing market share, a body of evidence exists to suggest that at least some of that lost share is being picked up by retailers’ private label brands.
Wal-Mart, the largest discount retailer in the U.S. (and overall largest retailer in the world), and
Target, the second-largest U.S. discount retailer, are both revamping and expanding their private label CPG brands this year. In addition, 7-Eleven, the largest convenience store retailer in the U.S., is also
updating and extending its private label brand of CPG products.
Independent research also indirectly confirms that private label products, which offer consumers lower prices and retailers higher margins, are growing in popularity during these difficult economic times. The
Retail Trend Tracker Survey from
The Gordman Group indicates that 90% of respondents say the economy has affected how much they spend, and 80% say the economy has affected where they shop. In the last three months, 45% of respondents have spent less, and 31% expect to spend less in the next three months. More than half of respondents, 54% plan to spend a larger share of their budget at Wal-Mart in 2009 than they did in 2008.
With a strong majority of consumers being affected in their shopping by the economy, and roughly one-third of consumers expecting to spend less money in the next three months, private label CPG goods would appear to have an advantage over name-brand competitors. Add in the popularity of Wal-Mart, which is making a major private label push in the CPG space, and Procter & Gamble, as well as any other major CPG company, have reason for concern.
Other factors may be affecting Procter & Gamble’s sales, as well, but the company’s willingness to offer discount prices suggests that cost is trumping brand name recognition in the CPG arena.
