Private Label FMCG report released by IRI

Fast Moving Consumer Goods (FMCG) market and shopper intelligence firm IRI today launched its annual special report about the private label market in Europe and the US.  The report, 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.

A reduction in promotions by retailers has increased the product price of private label while national brands maintain promotional levels as they fight for share in a highly competitive market. As a result, the price gap between national brands and private label products has narrowed. The increased price of private label netted retailers in the UK an extra £50m – and a total of 0.5 billion Euros (0.4% increase) across Europe and the US.

Private Label is on average priced at 27% cheaper than equivalent national brands in the UK and this difference has narrowed by 0.3 points in the last year. The price gap has closed the most in chilled and fresh food and frozen food, both categories where retailers have performed well in the last year.

Tim Eales, director of strategic insight at IRI, says “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.”

“Retailers continue to give their products more personality as ‘brands’ and focus less on low prices. 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 optimisation will maximise sales for entire ranges.”

Other highlights from the report include:

 

• Private Label value share is growing where shoppers are not convinced by the quality for value offer of national brands. 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.  However private label is behind much of the strong sales growth in the UK, which has the largest share of private label and increased its value share by 0.6 points to 51.1% and unit share by 0.2 points to 57.6%.

• Retailers must address assortment from a shopping basket perspective to avoid hitting a growth ceiling– even though PL 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 PL 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.

• Frozen food growth for retailers – the horsemeat scandal has not dented overall European sales of frozen food in the last year. 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.

• National brands are growing value sales in all sectors except alcohol (beer, lager and cider only), which had more than 3 billion Euros in value sales in the UK in the last year, a total category decline of 0.4% in the year to June 2013.

• Private label struggles to make a foothold in categories where shoppers are often extremely loyal to their favourite brands such as tea, chocolate and personal care and some other food categories.