Private Labels Continue to Gain Market Share
From Melody Vargas,
Your Guide to Retail Industry.
July 22, 2005
Private Labels Continue to Gain Market ShareSince 1998, the private-label segment of the over-the-counter (OTC) drug market has grown from $2.8 billion to $3.4 billion. Led by discounters and mass merchants, the overall share for store-brand OTC medications increased to more than 20 percent of the total market and continues to rise.
According to data from Kline & Company's NONPRESCRIPTION DRUGS USA 2004 industry analysis, a key driver behind this growth is the push of private labels by retailers, especially mass merchandisers like Wal-Mart and Target, as well as wholesale clubs like Costco. Mass merchandisers, wholesale clubs, health food stores, and convenience stores together account for a growing percentage of the OTC sales total, up from 32 percent in 1998 to 39 percent. In addition, private labels are given a much larger proportion of retail shelf space in these outlets.
Consumer brand loyalty varies between product categories however. When looking for vitamins and first aid products, for example, many consumers will simply buy whatever is cheapest. Private-label products have the highest penetration in these product categories, accounting for over 30 percent of category sales, according to Kline's study. However, some OTC categories, such as contraceptives and oral care products, foster a greater level of brand loyalty. For those products, consumers are more concerned with performance than value. Traditional branding, aggressive marketing, and unique characteristics of the sector have also enabled marketers to hold their ground. Still, Kline's study shows steady growth of private labels in nearly all the categories it covers.
As in other retail sectors, the OTC market has seen a higher level of sophistication in the way private-label products are presented to consumers. The design and packaging for store-brand nonprescription drugs has blurred the line between traditional brands and private labels. Accompanying this is a direct assault on branded products by some private labels that name their competitors and invite comparisons right on the package.
"For the branded products, innovation and differentiation are key to retaining consumer loyalty and staving off private-label competition," says Susan Babinsky, senior vice president and head of Kline's healthcare consulting practice. "It's a challenge, since they aren't going to meet private label on price, and there's a greater awareness among consumers that private label offers similar formulations, which often removes the advantage of a higher perceived effectiveness for branded products."
Your Guide to Retail Industry.
July 22, 2005
Private Labels Continue to Gain Market ShareSince 1998, the private-label segment of the over-the-counter (OTC) drug market has grown from $2.8 billion to $3.4 billion. Led by discounters and mass merchants, the overall share for store-brand OTC medications increased to more than 20 percent of the total market and continues to rise.
According to data from Kline & Company's NONPRESCRIPTION DRUGS USA 2004 industry analysis, a key driver behind this growth is the push of private labels by retailers, especially mass merchandisers like Wal-Mart and Target, as well as wholesale clubs like Costco. Mass merchandisers, wholesale clubs, health food stores, and convenience stores together account for a growing percentage of the OTC sales total, up from 32 percent in 1998 to 39 percent. In addition, private labels are given a much larger proportion of retail shelf space in these outlets.
Consumer brand loyalty varies between product categories however. When looking for vitamins and first aid products, for example, many consumers will simply buy whatever is cheapest. Private-label products have the highest penetration in these product categories, accounting for over 30 percent of category sales, according to Kline's study. However, some OTC categories, such as contraceptives and oral care products, foster a greater level of brand loyalty. For those products, consumers are more concerned with performance than value. Traditional branding, aggressive marketing, and unique characteristics of the sector have also enabled marketers to hold their ground. Still, Kline's study shows steady growth of private labels in nearly all the categories it covers.
As in other retail sectors, the OTC market has seen a higher level of sophistication in the way private-label products are presented to consumers. The design and packaging for store-brand nonprescription drugs has blurred the line between traditional brands and private labels. Accompanying this is a direct assault on branded products by some private labels that name their competitors and invite comparisons right on the package.
"For the branded products, innovation and differentiation are key to retaining consumer loyalty and staving off private-label competition," says Susan Babinsky, senior vice president and head of Kline's healthcare consulting practice. "It's a challenge, since they aren't going to meet private label on price, and there's a greater awareness among consumers that private label offers similar formulations, which often removes the advantage of a higher perceived effectiveness for branded products."
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