CHICAGO (Reuters) - Consumers might be starting to shift to lower-priced private label household and personal care products from brand-name competitors as gasoline and food prices continue to rise, according to Citigroup analyst Wendy Nicholson.
Recent data have shown private label products gaining market share, Nicholson wrote in a research report.
The market shift may be a result of a combination of factors, including improved quality of private label, or store brands; an increased emphasis on the products; and a changing perception of private labels by consumers, the note states.
An increase in average weighted market share of 0.5 percent occurred for the four-week period ended May 17, while a 0.7 percent bump was registered for the period ended April 19.
Both numbers are higher than the year-to-date average of 0.4 percent, she said.
Private label occupies just 11.4 percent of market share, but “the magnitude of these share gains still warrants increased attention,” the note says.
The average price gap in the categories where private labels are most competitive has narrowed only slightly from 21 percent so far in 2008 compared with a 22 percent difference from brand-name products in the same 2007 period.
Branded and private-label product makers have both been raising prices in recent months to help offset soaring costs for energy, wheat and other commodities.
Companies such as Clorox Co (CLX.N), Kimberly-Clark Corp (KMB.N) and Energizer Holdings Inc (ENR.N) that sell personal care and household products face the biggest risks from private-label, Nicholson said. Products such as bleach, paper napkins and batteries are among those that face the most competition from private labels.
Safer bets are companies more insulated from private-label competition, such as Avon Products Inc (AVP.N) and Estee Lauder Cos Inc (EL.N), which specialize in cosmetics and fragrances, the note states.
Reporting by Erin Zureick, editing by Gerald E. McCormick