Google CPG blog - News and Notes from Google"s CPG Vertical

Consumers Seek Value. But Value Means More than Low Price.

Monday, August 03, 2009

Posted by Jenny Liu, Industry Marketing Manager, CPG

According to a recent Harris Interactive study, 62% of online consumers are purchasing more generic brands as a result of the recession.
But are consumers willing to switch to generic brands across all categories?

Mintel, a CPG solutions and research provider, says that U.S. consumers have a much closer relationship with their branded personal care and health products than food. This is especially evident when you compare this U.S. behavior to that in Europe. In Europe, private label personal care products are a lot more commonplace. Some of these European private labels like Boots have even entered the US market as a strong competitor.

This relationship was confirmed in a recent ICOM survey who's stats provide a rank list of product categories.
Respondents of the survey said they would switch to generic brands as follows:

59% for food and household products
48% for health products
48% for personal care products
23% for pet care products
12% for child care products

Not surprisingly, consumers are least willing to switch to generic store brands when it comes to their pets and kids. In those categories, the brand equity is something that consumers are willing to pay for.

Another thought occurs to us as we visit this story. It's common for prescription health products to have a "generic" version. But it seems odd to refer to traditional consumer packaged good products found in food, drug and mass as "generic". As a matter of fact, these days, private-label brands are everything but generic.

According to Mintel, private labels are providing more than just cheap alternatives to national brands. They are attracting shoppers with premium ingredients, portability and health benefits.

In the first half of 2009, Mintel has seen almost 1,800 new U.S. private label introductions in food, which accounts for 27% of all new food products introduced year to date. Compare this with that in 2005, when only 13% of new food product launches came from private label.

The new product innovations coming out of private label lines no longer rely on 'me-too' products. According to Mintel's Krista Faron as quoted from QSR magazine, "Private label manufacturers realize 'value' means more than 'low price' to consumers, so they're wisely creating new products that deliver on some of today's most exciting food trends."

This includes giving shoppers convenience, nutrition and even ethnic fare that may help target the local demographic. Examples taken from the QSR article include: SuperValu's Culinary Circle line features an upscale Pork Carnitas Enchilada Casserole. Safeway has jumped on the portable and high-quality lunch bandwagon with their line of Rice Noodle Soup Bowls which makes "desk-dining easy". Lucerne Foods has an Eating Right brand that includes kids' Whole Wheat Mini Ravioli with fiber and protein and Light Ice Cream Cups containing probiotics.

It seems that one of the big advantages to being a private label brand is the ability to compete across many different categories which allows them to identify trends from one category and implement it in another. They also know their local demographic well, and can cater to the taste and value attributes of their immediate audience. These make private label brands a force to be reckoned with. It therefore becomes all that much important for CPG brands to maximize top of mind awareness and show that they are an expert in their field.

Google research conducted in 2008 showed that paid search is an effective way for CPG brands to effectively lift top of mind awareness. Across four different CPG industries, a search result served in the top sponsored position triggered with a non-branded keyword showed a range of 10% point to 28% point lift in unaided awareness.