IRI Report Says Retailers Re-assess Quality of Private Label Ranges as Shoppers Focus on Value Instead of Price
Fast Moving Consumer Goods (FMCG) market and shopper intelligence firm IRI on November 14 issued its annual special report about the private label market in Europe and the United States. The assessment, which outlines where the private label market is today and how it is likely to evolve over the next year, highlights the rising price of retailers’ own brands as they reduce promotions and increase their focus on quality, with many re-launching premium ranges.
The price gap between national brands and private label products has narrowed in every country except Germany. A reduction in promotions by retailers has increased the product price of private labels, while national brands maintain promotional levels as they fight for share in a highly competitive market. The increased price of private label products netted retailers an extra 0.5 billion euros (0.4% increase).
Tim Eales, director of strategic insight at IRI, commented: “With its three-tier approach, private label continues to play a vital role for retailers as shopper confidence remains fragile. Shoppers want quality as well as value and so as the perceived quality increases – with more premium ranges being launched – they are more confident to buy private label and pay more for it.”
“As private label gains ground in the quality and price debate, this creates even more pressure for national brands that must work harder than ever to tell a compelling and shopper-focused story,” added Eales. “Sharing category level insight and engaging in localized assortment optimization will maximize sales for entire ranges.”
IRI advises retailers and manufacturers to collaborate, using predictive analysis tools to find the optimum assortment and price mix for individual products and categories that will benefit everyone, including shoppers.
“In many countries private label already marginally under performs its share of assortment versus its share of value sales,” said Eales. “In Germany for example it contributes 34% of value sales from a 27% share of assortment.”
Other highlights from the report include:
Frozen food – the horsemeat scandal has not dented overall European sales of frozen food in the last year. However, value sales did fall in Italy, Greece and Spain whereas in the largest market for overall sales of frozen food, Germany, there was good growth in both value and unit sales. Frozen food in the UK was one of only two categories (the other was chilled and fresh food) to see an increase in private label unit share. In Germany the frozen food category is largely driven by private label, and grew by 9% in value.
Private Label value share is growing in every country except France, where shoppers are not convinced by the quality for value offer. Overall in Europe Private Label commands a 47.1% unit share of all FMCG sales and contributes to more than half of the growth in Europe. Private label sales are performing strongest in countries where overall FMCG sales are in decline (such as Italy and Greece), or where overall FMCG sales growth is less than 1% (Germany, the Netherlands and Spain, for instance). In France and the US, where total FMCG sales growth is stronger, national brands drive sales growth. However private label is behind much of the strong sales growth in the UK, which has the largest share of private label.
Retailers must address assortment from a shopping basket perspective to avoid hitting a growth ceiling – even though private label increasingly takes priority on the shelf, retailers are taking a more analytical approach to avoid stocking duplicate products and reaching the point that too much private label turns off consumers. National brands spend huge amounts of money on marketing to drive shoppers into store and the importance of their presence on the shelf must not be underestimated.
Dutch retailers go against the trend with a focus on value private label. Retailers in Holland are trying to combat the discounters who are managing to convince shoppers their products not only cost less but also are also of good quality. Private Label’s share of value sales rose 0.5% to 40.4%.