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Trend Watch: Private seafood

Competition, not lagging economy, pushes generic store brands

Blue Horizon is focusing its private-label efforts on
    the European market. - Photo courtesy of Blue Horizon Seafood
By Lauren Kramer
October 01, 2008

Consumers curtail spending as much as possible during tight economic times. It would make sense that growth in private-label products would appear to be a natural consequence, given the traditional lower prices of private label as compared to national brands. But a recent study by The Nielsen Co. clarifies this misperception.

Released in June at Nielsen's Consumer 360 Conference, the analysis demonstrates that growth in private label is being driven by rising commodity and food prices, not as a result of consumers abandoning national brands. While dollar sales of private-label products are up, the fact that unit sales are down slightly indicates that higher unit pricing is the main driver of growth, particularly in categories with strong private-label sales, such as milk, eggs and cheese.

"This increases the appearance of private label sales increasing, but when unit sales are flat it means people aren't buying more private label products they're just paying more for what they're buying," says Tom Pirovano, Nielsen's director of industry insights.

The reason the market hasn't witnessed more shifting to private-label products is that consumer behavior is hard to change when it comes to spending habits. "They tend to buy what they've traditionally bought over the years, even though they know they need to be saving money," he says.

Unit sales showed slight decreases for both national brands and private label. For the 52-week period ending April 19, Nielsen statistics show that national brand sales across all categories were down 0.4 percent, while private-label sales were down 1.2 percent.

"The prices seem to be rising more rapidly in categories 
where private label is strong," says Pirovano.

In the unbreaded frozen seafood category, grocery store dollar sales were up 16 percent for the 52-week period ending June 14, yet unit sales increased only 5 percent. "That tells us people are eating more frozen seafood and prices are increasing, but they continue to eat it," says Pirovano.

Figures from the New York-based Private Label Manufacturers Association are more encouraging for those in the private-label seafood business. PLMA's statistics show that private-label frozen seafood sales totalled $713 million last year, an 11.4 percent increase over the previous year. By contrast, national brands in the same category increased only 1.5 percent. The unit increase for private-label sales was more modest at 1.6 percent, while national brand unit sales declined 0.7 percent.

Similarly, for the quarter ending June 16, private-label frozen seafood sales increased 4.4 percent over the same quarter a year ago, while sales for national brand seafood declined by 0.4 percent. Private label units increased 4.8 percent while national brand units declined 4.6 percent.

At Blue Horizon Seafood, CEO John Battendieri says the company has seen increased interest in its private-label offerings, which it sells to retailers, wholesalers and brand marketers, but has not capitalized on that interest yet. "In this country private label still represents a low percentage of products compared to Europe, and we think there are more opportunities in Europe because of the strength of the categories we're in," says Battendieri.

The Aptos, Calif., company focuses on value-added, certified organic seafood ingredients in its frozen packaged products, such as crunchy garlic shrimp with herbs and spices.

"We have to pay a premium for our products, but we're pleased to say that the health-conscious consumer is still willing to pay for the difference," he adds. Private label constitutes 15 percent of Blue Horizon's overall business.

MS Intertrade, which produces the brand Sonoma Seafoods in Santa Rosa, Calif., supplies private-label seafood to specialty and higher-end regional grocers throughout the United States. CEO Matt Mariani says the company has not seen increased demand due to the recession in the larger economy.

Private label represents up to 40 percent of the company's business, and Mariani speculates that as a whole private label in processed food categories will do better during a recession.

"Retailers will try to push it more during a recession, as opposed to pushing the slightly higher priced national brands in a stronger economy," he says.

So far there have not been any significant in-store changes when it comes to private label, said one industry representative from a major grocery store who requested anonymity. "Moving into private label with commodity type items is more about trying to communicate to the customer that the quality they bought is associated with the banner of the store," he says. "It's used more as a differentiator for your quality items than just as a price point.

"Typically the items we'd be doing in private label, be they steaks or fillets or the shrimp program, are the best quality we can get and are comparable to national brands, but they don't give us a cost advantage like cornflakes in the main aisle," he continues. "At least at this point, our private-label sales haven't been strong enough to make a huge commitment there."

In part, the reason there's been no change in the push for private label seafood since the recession set in is because the push was so strong to begin with, says Steve Young of BistroFresh, a company where private label represents 75 percent of business.

"It's not recession driven, just competitive driven," he explains. "The competition has become so much more intense that the stores are having to find ways to define themselves as individuals, and the only way to do that is through private label."


Contributing Editor Lauren Kra m er lives in British Columbia


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