Private label benchmarking: how to measure the gap against a store brand

A gap is only as good as the pairing behind it. A pair is matched when both packs agree on all five of these.

1. Retailer and stores. Both packs are priced at the same retailer, in the same stores. A store brand exists only at its own retailer, so every benchmark is retailer by retailer.
2. Date. Both prices were observed on the same day or in the same week.
3. Segment and format. Same subsegment, same container, same pack format. A multipack is not a single.
4. Price type. Both regular, or both shelf (the price a shopper pays that day, deals included). Never one of each.
5. Size, or the same price per unit. Same pack size, or the store brand’s price per unit at your size, read off its own ladder.

Sue Nicholls of CMKG describes the practitioner version: keep each retailer’s store brand separate from generics, and run the gap against the same-size national brand over a 52-week window, flagging weeks the store brand priced above the national brand. Her value map uses an equalized volume price on the price axis, not the average unit price. Both points are the matching rules above.

Worked example: no store-brand pack at your size

Brand A’s 20 oz pack sells for $6.00, or 30.0¢ an ounce. The store brand sells 12 oz at $3.00 and 32 oz at $6.40, and nothing at 20 oz. Any pairing you grab is a different size, and size alone moves the price per ounce.

Shelfprice applies a stricter rule than this example: it pairs a branded pack with the store-brand pack of the same container and format within half a doubling of its size (a ratio of 1.41) at regular price, and says so when there is none. Neither store-brand pack here qualifies: 32 oz is 1.6 times the size and 12 oz is 1.7 times smaller. The ladder reading is for the analyst who still has to put a number in a deck. Label it as read from the ladder, as the figure does with its star.

Every figure below is accurate for what it measures. None is a benchmark for your pair, and no two can be compared with each other. That is the point of the table.

The figures part ways for three reasons.

• Different denominators. A 20% discount and a 25% premium are the same fact. Most published numbers do not say which they are.
• Different baskets. A matched pair, a basket of staples and a whole store are three different populations.
• Different prices. Regular price, shelf price with deals and average price paid give different gaps, as the third example shows.

Dates matter too. ERS reports 21% in one 14-month window and 25% in the next on the same two chains, so the gap moved by four points between two consecutive windows. Quote the period with the number, and do not use a 2008 to 2010 figure as the current gap.

Large retailers run several store-brand lines at different price and quality points. The common split is a value tier (also called economy), a standard or mid-market tier priced as the national-brand equivalent, and a premium tier, with natural and organic lines often separate. Kantar’s per-item figures above are split in three tiers, and CMKG’s value map places store brands on a price and value scale the same way.

Each tier sits at a different distance from the national brand, so each has its own gap. Averaging them gives a number that describes none of the shelves a shopper actually sees.

In the illustration, the three tiers sit 40%, 25% and 10% below the national brand. The equal-weight pool is 25% below. It happens to equal the standard tier and says nothing true about the value tier, which is well below, or about the premium tier, which sits close. Read the other way, the national brand is 67% above the value tier and 11% above the premium tier.

CMKG’s reading of the value map is the useful one for a manufacturer: brands that sit close together on price and perceived value compete directly, and a store brand whose gap grows too large pulls shoppers down while one whose gap shrinks too far invites them up. A national brand close to a store brand in perceived value is the one exposed. A brand far away on both axes barely feels a store-brand price move.

So benchmark your brand against the tier nearest it in price and quality, and report the other tiers as context. Fix the tier assignment by retailer brand name, write the mapping down, and keep it constant between reports. CMKG also advises keeping generics separate from the retailer’s own brands, for the same reason.

1. Define the store-brand lines. List each retailer’s lines and assign each a tier. Keep every line separate from generics.
2. Fix the national brands. Choose your own brand, the category leader and the brand you lose shoppers to. The leader shows the price anchor, and the one you lose to shows where your position is under pressure. Keep the list stable.
3. Match each pair on the five rules above.
4. Compute per unit, with a stated direction. Report the percent and the cents per unit, and the dollars per pack where packs differ.
5. Use two price types. The regular-price gap is the structure. The shelf-price gap is what shoppers saw. Report both and do not blend them.
6. Summarize with a median, the range and the number of pairs. Label the stores and dates.
7. Track the gap against your own band. Investigate when it leaves the band and split the move into your price, their price and deals.

Worked example: regular price against deal price

Take the 32 oz pair again. Brand A goes on a 25% deal, and the store brand either holds its regular price or answers with 20% off.

Worked example: pack mix moves the blended gap

Brand A sells a 12 oz and a 32 oz pack, and the store brand sells the same two sizes. No price changes between the years. Brand A’s volume shifts from the small pack to the large one.

The direction of this pattern, a gap that narrows on the large pack, belongs to the illustration. In your category the shape may be the reverse. Plot both ladders and read yours. Pack price ladders and price per unit analysis cover the mechanics.

The sources do not support one. They support these narrower statements.

• The gap is not constant. ERS measured 21% and 25% at the same two chains in consecutive periods, and reported that temporary discounts lowered prices significantly in the recession period.
• The gap depends on the tier, as the figure above shows, and on the price type. A regular-price gap and a shelf-price gap for the same pair can differ widely, as the deal example below shows.
• CMKG’s method for retailers sets guardrails from analysis, not rules of thumb. It describes setting a ceiling so that the store brand is never priced above the national brand, or only within a defined percentage, and basing it on elasticity and profit analysis, not intuition.

Why the gap varies by category is reasoning here, not measurement. Where promotion is heavy, the regular-price gap and the shelf-price gap drift apart, and ERS found store brands discounted most often in categories with many national brands. Where the store brand is a premium line, the gap is narrower by construction. And the same percent is a different amount of money on a one-dollar item and a ten-dollar item. Check every category against its own history.

For a manufacturer, the gap is a condition set by the retailer, not a target. Your job is to know your normal band and notice when you leave it. To define the band, record the regular-price gap for each of your pairs every week for at least twelve weeks. Take the median and the middle half of the pair gaps as your band. A move outside it is worth investigating, and a move inside it is ordinary noise.

These are the author’s rules of thumb for shelf data, not published thresholds. Tighten them where your decisions are expensive.

• Count pairs, not products. One national-brand pack against one store-brand pack, at one store, on one date, is one pair. The same pair in five stores is five looks at one pair, not five pairs.
• Under five pairs, list them. A median of three is a list. Show every pair.
• Five to nine pairs, report the median and the range together with the count. Do not split by tier.
• Ten or more, add the middle half and split by tier only where each tier has at least three pairs.
• Name the stores. Shelf prices differ by store and zone. A handful of stores is a sample, not the market. Shelfprice’s coverage is one retailer group in a few metros, and a national read needs scanner or panel data.
• Know what you cannot weight. Shelf data has no sales weights, so the median and the mean of pair gaps are what you can compute. A sales-weighted gap needs scanner data from a syndicated source or your own retailer feeds. The three headline numbers differ, so always say which one you quote.

Cadence follows what moves. The regular-price gap changes only when someone reprices, so a monthly read is enough for structure. The shelf-price gap follows the promotion calendar, so it needs a weekly read. Re-measure straight after any list change, any competitor or store-brand launch and any retailer reset.

First, find out what moved. A change in the gap comes from your price, the store brand’s price or a deal. Each has a different owner and a different response.

Two links to the rest of the toolkit. Closing a gap with deals is a trade-spend decision, so judge each event on profit against baseline, as in the net revenue management guide: a deal that only restores the gap for a week can cost more than it earns. And the gap is the competitive reference for the ladder, so it belongs with the structure work in the price pack architecture guide.

1. Quoting the gap without direction or denominator. 20% and 25% are the same pair.
2. Comparing different sizes. The size example above moved the gap from 16.7% to 33.3% on size alone.
3. Mixing regular and shelf prices in one comparison. A deal deeper than the gap flips the sign.
4. Pooling tiers. The premium tier narrows the average and the value tier widens it. Neither is the shelf your shopper compares.
5. Pooling store brands with generics. They serve different shoppers and have different prices.
6. Comparing total prices. Compare per unit, or read the store brand’s price at your size.
7. Benchmarking against a national brand that is not an equivalent. A different subsegment answers a different question.
8. Taking one store, or one retailer, as the market. Store brands are retailer-specific, and shelf prices differ by store.
9. Treating the gap as your target. The retailer sets its price. You manage your own position against it.
10. Using an old figure as current. A 2008 to 2010 ERS number is history. The gap moved by four points between its own two periods.
11. Reading a narrowing gap as bad news in isolation. A narrowing gap can come with a store-brand share gain, and a widening one with a share loss. Read the gap next to volume and share, which shelf data cannot supply.

• Quality is not in the price. A matched pair is matched on size, format and segment. The store brand may still differ from the national brand in quality, and the gap does not measure that. The tier split only partly stands in for it.
• Units can mislead. Price per ounce is the wrong unit where shoppers compare by count, load or serving. Use the unit shoppers compare.
• No equivalent exists. A new store-brand line may have no matching national-brand pack. Do not force one.
• Samples miss deals. A shelf read taken on a schedule can miss a short event, so a regular-price gap is more stable than a shelf-price gap.
• One retailer is one retailer. Each store brand belongs to its own retailer. Across retailers the same method gives different gaps, and pooling them hides both.
• The ladder reading is a model. Interpolating a store-brand price assumes a smooth curve between two packs. Label any number you read that way.

Where Shelfprice fits: it does this matching for the categories it covers. It classifies each store brand by tier (value, standard, premium, natural and organic, specialty), and compares a branded pack with the standard tier first, then value, then the others. It pairs packs by container, format and size, uses regular price, and reports the gap per unit, per pack and in percent. It sees shelf prices only, with no sales volume, share or quality. One retailer today: Kroger, Ralphs, King Soopers and QFC stores in 5 metros.