The Impact Of Private Label Sales Penetration On Category Profitability

Abstract

This study analyzes the impact that private label brands have on category profitability in supermarkets within the framework of category management. Category management seeks to enhance the overall performance of product categories as measured by profitability. Private label brands have dramatically increased in recent years in supermarkets with a key objective of improving category profitability.

This longitudinal study uses Point-of-Sale (POS) data from a supermarket retailer over three years consisting of 39 periods. Data is collected from ten product categories from the center store comprised of dry grocery, frozen foods, and refrigerated dairy. The results of this study indicate that in only two categories, a significant positive relationship existed between category private label sales penetration and category profitability.