New shopper research by Perception Research Services (PRS) shows that fewer consumers reported purchasing private label products on a regular basis, compared to the last survey conducted in July (84% vs. 94%), but those buying private label are buying more of it (the average number of items is up from 4.8 to 6, an increase of 25%).

Categories showing the largest increases include cereal (+20%), cookies and frozen meals (both +14%). Paper products continue to lead all private label brand categories.

These findings coincide with recent optimistic economic indicators, including the latest report from The Conference Board showing an increase in their Consumer Confidence Index, after seeing a major decline in July. The latest GDP figures are up as well, as are reported sales at U.S. retailers – the most in 7 months.

However, the data suggest that while private label penetration may have peaked, a significant portion of "try-ers" have been converted to "believers" who now choose private label alternatives for more types of products.

“We're seeing a new paradigm in shoppers' attitudes – forced to seek less expensive alternatives for economic reasons, and having found satisfying options, they now need a compelling reason to pay more,” according to Jonathan Asher, senior vice president of PRS. “We've even heard from higher-income shoppers that ‘value is the new chic.’”

Advice for retailers, brand owners

"These trends point to some interesting challenges and opportunities for both retailers and national brand manufacturers," Asher continues.  "Retailers cannot sit back and assume that economic conditions alone will lead to an ever-increasing share of market for their own brands. They must continue to invest in their brands as they have during the past few years, improving their product offerings and the packages they come in.

"For national brand manufacturers, the need for innovation has never been more critical. Shoppers must be given a meaningful reason to pay more. And as the economy continues to improve, they will likely be increasingly eager to find those small indulgences with which they'll be happy to reward themselves, at long last."

The four “waves” of this research were conducted in May, 2009, and January, July, and November, 2010, across the U.S., among roughly 600 primary household grocery shoppers aged 18-64. 

Perception Research Services Intl., Inc.