NEW YORK – Private label brands in the United States are forecast to expand their share of the market from 20% today to 25% to 30% in the next decade, according to a new report from Rabobank. The research firm said the growth would put the United States on par with Europe in terms of market penetration and translate to one in every three food product purchases in the United States being a store brand.

“Many national brand owners need to be bolder in their thinking and strategizing,” said Nicholas Fereday, Rabobank analyst and author of the report “What would Apple do?  How can U.S. branded food companies withstand the retailer brand onslaught?” “Instead of opting for low cost, low risk, conservative solutions, they need to think and act more like the Apples of the world, innovating new game-changing food products and entering new categories.  Alternatively, national brand owners should consider downsizing brand-building efforts and diversifying their manufacturing into B2B activities.”

Rabobank said the increasing competitive strength of retailer brands reflects a power shift from consumer packaged goods companies to food retailers, as well as the growing trust and loyalty consumers have to today's innovative and high quality retailer brands. The company noted that retailer brands have grown 6% over the past five years compared with the sales of national branded packaged food manufacturers, which have grown just 2%.

“Retailer brands have matured from their original positioning as ‘cheap and cheerless’ generic products into a more diverse range of national brand equivalents and, more recently, highly innovative premium products,” Mr. Fereday said. “On grocery shelves around the U.S., from convenience stores to upscale supermarkets, retail brands now compete successfully and often win against national brands, earning consumer trust in terms of pricing, quality, image and value.”

The Rabobank report highlighted several reasons why market penetration of private label brands will grow, most notably through innovation and investment; a focus on value during recessionary times; and the changing dynamics of the retail sector, which is being impacted by the emergence of mass merchandisers like Wal-Mart and Target as well as hard discounters like the dollar stores.

To combat private label growth, Rabobank made two suggestions. First, National brands must focus on “real innovation.”

“National food brands need to follow the creative model of other industries, funding research that will lead to radical new products which address unmet consumer needs, or create wholly new categories,” Rabobank said. “Currently more than three quarters of new food products are line extensions or product derivatives.”