How to mitigate private-label success in recessions? A cross-category investigation

Abstract

This study investigates whether managerial practice in correspondence with the business cycle is partly responsible for the intensified popularity of private labels in recessionary periods. First of all, the results show that private-label share behaves countercyclically, and that part of the boost in private-label share is permanent. Moreover, most managers seem to adjust their behavior in response to economic downturns by cutting advertising budgets, scaling back innovation activity, and lessening price-promotional activity. More interestingly, this managerial behavior is linked to the cyclical sensitivity in private-label share, which in turn is strongly related to this long-lasting effect of a recession on private-label share. Hence, the dominant practice of reducing brand support in a recession enhances the success of private labels during and beyond the recession.

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