National brands fight back against growing retailer own brands, study finds

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Tesco's  Everyday Value brand: gaining ground

Tesco’s Everyday Value brand: gaining ground

National brands (NB) are fighting hard to protect their share of the market despite the growth of retailers’ own brands, which help cash-strapped consumers reduce the cost of their weekly shop.

That’s one of the key findings of a new report by SymphonyIRI Group.

The report – Private Label in Europe 2012 – highlights growth for retailers own brands in most categories. The highest growth was seen in chilled ready meals where private label (PL) sales are up 14% in the last year and now have 92% share of the overall grocery market. Retailers also grew their share in light bulbs (up by 12 share points in the last year) and wipes (up by three share points). 

The way PL is perceived by shoppers has changed, claim researchers. The quality and range of products is improving, retailers are awarding PL more prominence in-store to secure greater margins at the expense of small and mid-ranking NB and they are spending more on marketing to reiterate that buying PL does not mean compromising on quality.

Persuaded by these arguments, retailers’ PL share continues to rise across Europe. In the UK it is now at 50.5%of all grocery sales by value (an increase of 0.5% over the last year) and 57.3% of all grocery sales by unit (an increase of 0.3% over the last year), the highest in Europe, said SymphonyIRI Group.

Retailers are also working hard to build a personality around their own brands and engage with shoppers, said researchers. 

Tesco for example has reinvented its value range as Everyday Value with colourful new packaging. The retailer claimed value sales were up 10% in like for like sales in the first half of the year compared to the previous half year, as a result of its new range. Meanwhile Morrisons M Bistro sub brand of premium products is being applied to more than 500 M Kitchen lines.

Manufacturers are responding to the continued growth of PL with clever promotion and pricing strategies, the re-engineering of some lines and the launch of new variants, said SymphonyIRI Group.

They are also spending more time developing and adjusting their portfolio and how they approach individual retail chains.

“We are seeing a more permanent change in consumer attitudes to PL and, if the products meet shoppers’ expectations, brand loyalty could shift away from many NB long-term,” said Rod Street, executive vice president at SymphonyIRI Group. 

“However, most people will continue to fill their shopping baskets with a mix of PL and their favourite brands. As a result, PL could hit a ceiling in many categories regardless of how far retailers promote it.

“Retailers and FMCG manufacturers must have a deep understanding of what makes the grocery shopper tick and be brave about innovation and differentiation which will be crucial to driving sales. Food manufacturers in particular need to review their brand propositions for saliency and value in the face of continued pressure on shoppers. This means working in partnership to track and analyse shopper behaviour to develop engaging propositions.”

The report explores current and emerging private label trends across Europe. It looks at key indicators such as the value and volume share of private label as well as the price and promotions pressure for FMCG products across seven European countries (France, Italy, Spain, the United Kingdom, Germany, the Netherlands and Greece). It covers grocery sales in supermarkets, hypermarkets and drugstores for the year ended 7 July 2012. Retail Times’ readers can download the full report from www.symphonyiri.co.uk.