With Consumer Spending Across Categories Back on the Rise, Ad-Spending Forecasts Are Also Up.

That’s the good news for brand marketers. The bad news is, so far, they’re largely staving off private label by reducing price gaps. That comes from a combination of the brand marketers cutting prices and private labels raising them as they catch up with hikes the branded players took a year or more ago, according to reports by Bernstein and Consumer Edge.

Share losses to private label are hard to regain. On average, brand marketers have gotten back 30% to 40% of the share lost to private label in past recessions. But it could be harder this time, Bernstein analyst Ali Dibadj said, citing his company’s consumer survey showing 77% of consumers who traded down during the recession found the lower-cost products they bought “as good or better” as those they replaced. Those consumers generally said an improvement in their economic circumstances or outlook alone wouldn’t get them to trade back up. “They need either a decrease in price [of the branded products] or a new product or improvement in quality,” Mr. Bernstein said.

But Sean Seitzinger, senior-VP consulting and innovation at SymphonyIRI, said most efforts to win back private-label share through price cuts have failed for package-good players, noting that volume hasn’t significantly been increased despite price cuts. “There are a lot of dollars being thrown [at price] but those dollars are delivering a very poor return on investment,” he said. P&G, Kellogg Co. and Kraft Foods, he said, are among manufacturers holding their own with private label by emphasizing the value of their brands in ways beyond price.

Marketers are more likely to succeed against private label through improved products or marketing better aimed at consumer segments, retailers and localities prone to switching to private label, he said. About 80% of package players in the past year, he said, have assigned executives specifically to combat private label.

To read this article, found in Advertising Age, in its entirety, click here.

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