Private Label CPG Dollar, Unit Sales Fall Again

July 8, 2010

Year-over-year dollar and unit sales of private label CPG goods both fell during the four-week period ended June 12, 2010, according to research firm The Nielsen Company. This marks the second straight four-week period both dollar and unit sales, with unit sales now having declined in three straight four-week periods.

Private label CPG dollar sales fell 1.1%, while unit sales dropped 0.8%. In contrast, CPG dollar sales rose 1.4% during the four-week period ending June 13, 2009, while CPG unit sales climbed 0.1%.

Dollar Sales Total $38B
Dollar sales of prepackaged, UPC-coded CPG goods were $38.6 billion during the most recently tracked four-week period, compared to $39 billion during the same period a year earlier. Fresh produce experienced the strongest sales growth rate of any department for the second straight four-week period, 6.3%, rising from $1.37 billion to $1.46 billion. Alcoholic beverages trailed with a 3.2% growth rate, increasing from $1.8 billion to $1.86 billion, while dairy climbed 1.5%, from $3.56 billion to $3.61 billion.

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Conversely, general merchandise sales had the highest rate of year-over-year dollar sales decline of any department for the second straight four-week period, falling 7.2%, from $2.57 billion to $2.38 billion, while non-food grocery sales repeated as the category with the second-highest rate of decline, dropping 3.6%, from $4.73 billion to $4.56 billion. Frozen foods had a sales decline of 1.9%, from $3.17 billion to $3.11 billion.

Dollar Segment Share Rises Again
Despite a drop in total year-over-year dollar sales, annual growth for private label CPG goods in terms of dollar segment share rose fractionally for the eighth straight four-week period. Dollar sales of private label CPG goods increased 0.6%, from 16.7% of the segment to 17.3%. Branded CPG goods accounted for the remaining 82.7% of the segment.

Every department experienced flat or positive annual dollar segment share growth. Six departments which experienced an annual positive dollar segment share increase of 1% or more: fresh meat (2.5%), fresh produce (2 %), deli (1.7%), non-food grocery (1.3%), and general merchandise and health and beauty aids (1.1% each).

Unit Sales Fall to 13.9B
Total unit sales for the four weeks ended June 12, 2010 were $13.9 billion, down from $14.1 billion during the equivalent four-week period in 2009. Fresh produce sales increased 4.4%, from 588.9 million units to 614.6 million units. Alcoholic beverage sales rose 2.2%, from 197.4 million units to 201.8 million units. Both deli and fresh meat sales rose 1.5%. Deli sales increased from 194.8 million units to 197.8 million units, while fresh meat sales rose from 56.2 million units to 57.3 million units.

All other departments reported flat or negative unit sales growth. Dry grocery sales remained flat at about 7.23 billion units, while general merchandise unit sales had the biggest rate of decline for the second straight four-week period, dropping 9.7%, from 436.9 million units to 394.6 million units. Non-food grocery unit sales repeated as having the second-highest rate of decline, falling 9.6%, from 1.14 billion units to 1.08 billion units, and frozen foods and health and beauty aid sales both fell 1.4%. Frozen foods sales declined from 1.09 billion units to 1.07 billion units, while health and beauty aids sales fell from 925.7 million units to 912.7 million units.

Unit Segment Share Falls
Unit segment share declined for the second straight four-week period, and in the past four periods has been flat once and dropped three times. Following a four-week period of year-over-year 0.1% decline, private label CPG goods accounted for 21.5% of the segment, 0.1% less than 21.6% a year earlier. Branded CPG goods accounted for the remaining 78.5% of the segment.

Despite the overall decline in private label CPG unit segment share, only three departments reported negative unit segment growth and one reported flat growth. On the positive side, general merchandise led all departments with 2.1% unit segment share growth, followed by fresh produce (1.8%) and fresh meat (1.4%). Alcoholic beverage unit segment share remained flat, while dairy lost 1.3% unit segment share, with packaged meat losing 0.9% and dry grocery losing 0.4%.

Less Exec Involvement Drives CPG Revenues
Brands and retailers interested in developing private label products should be aware that leaving executives out of the R&D process for new CPG goods can produce substantial benefits, according to other recent research from The Nielsen Company. Nielsen research indicates that companies with less senior management involvement in the new product development process generate 80% more new product revenue than those with heavy senior management involvement.

And placing physical distance between innovators and executives also helps make new CPG products more profitable. According to Nielsen research, companies with an off-site “Blue Sky” innovation team report 5.7% of revenues coming from new products, compared to 2.7% when the team is on-site.

Nielsen advises that heavy involvement in new product development from the senior staff can destroy value. Senior management is often too quick to get involved in the creative process, especially when things are not going well. Their mere presence can stifle free-thinking and boundary-less ideas, which can doom the new product development process to failure.

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