Sales of private label, or store brand, products have steadily increased over recent years, in part due to the recession and its effect on the lives of Americans.
In 2008, the private label dollar share increased from 16.1% to 16.9%, followed by a rise to 16.9% in 2009 and 17.2% by June 2010, according to recent reports (1). Not only indicative of millions of dollars in sales, the statistics also reflect the consistent and steady gain in share that private labels have taken away from national brands.
Prior to the recent recession, there was a common understanding among marketers, supported by highly-regarded research, that Hispanics were more brand loyal than other segments. A loyalty index showcased a three point difference of 26 to 23 of Hispanics compared to mainstream consumers (2). Additionally, consumer research concluded that the less acculturated the Latino consumer, the more likely he/she would remain to a brand. Research also indicated that Latino shoppers show greater affinity to brand names within high personal involvement categories, such as OTC medications, some specific house cleaning products and dairy and bakery (2), (3).
However, when the recession hit, along with most other segments, U.S. Hispanics’ adopted more conservative spending habits (4). In 2010, the share of private label products in the grocery baskets of Hispanics was an estimated 31% (5), compared to a national share 23.1% (6). National brands began experiencing dips in sales and started to question the previous industry consensus of Hispanics’ strong brand loyalty.
“The noted trend is that marketers today should assume that Hispanics have shifted their loyalty to private labels,” said Jim Legg, executive vice president of leadership and innovation. “National brands need to engage in stronger retail promotion strategies in 2011 to efficiently counteract their declining share, and win back the loyalty of Hispanic consumers.”
Many U.S. brand teams have bought into the myth that Hispanic consumers do not respond to retail promotions. The reality is that when properly executed, Hispanic retail promotions can out-perform general market initiatives. The San Jose Group (SJG) strongly encourages national brand clients to include retail promotions in their plans for the year. Recently, SJG created a retail promotion initiative for an infant formula client. The campaign produced a 5% redemption rate among U.S. Hispanic mothers that doubled the average rate, 2.7% at the time, of mainstream consumers.
Established in 1981, The San Jose Group is a traditional/digital persuasive content agency that specializes in developing innovative marketing communications solutions that connect brands and consumers to their core purpose. The agency’s Convergent Marketing Solutions model is supported by best-in-class business units that embrace today’s converging consumers, markets and channels. The San Jose Group and San Jose Public Relations are members of The San Jose Network Ltd., the largest independent advertising agency network servicing the U.S. and Latin America.
For more information, please email sjgpr@sjadv.com. For more information about The San Jose Group please visit www.thesanjosegroup.com
Sources:
(1) Canning, Kathie. Moving On Up. In: Progressive Grocery Shopper, September 2010 Store Brands, p 18-30
(2) Phoenix Marketing International. Hispanic Brand Loyalty Segmentation Study, 2009
(3) PGSTORE. One Size Does not Fit All. Feb 22, 2011
(4) US Diversity Markets Report. Synovate 2010
(5) Fauerso, E. 10 Things To Know About Hispanic Shoppers. October 31, 2010
(6) Symphony IRI Group. Store Brands: More than Just a Safe Harbor. June 2010
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As marketers, we need to make brands understand that Hispanics need a very good reason to buy their products. Because of the recession, some brands have gotten lazy to the point that they don’t pursuit innovation anymore. They take the Hispanic Market for granted based on the so-called “Brand loyalty”. The fact of the matter is that Hispanics are, without a doubt, Brand loyal consumers but, we need to reach them with campaigns that speak directly to Hispanics, with Spanish content (and not just English content translated directly to Spanish). This marketing approach needs to address quality, convenience and emotion. You get Hispanics what they need and they will follow your brand forever.