Private label grows again – why brands should be worried
Independent brands were once all powerful and ruled supermarket shelves, driven by strong customer loyalty. No more. Private label products, sometimes referred to as own brand or own label, continue to build strong customer bases.
"There has been a notable rise in the popularity of own brand products over independent brands across Europe,” Katya Witham, associate director for Mintel Food & Drink, says.
In fact, according to Statista data, private label consumer goods are performing better than branded products for sales growth rates. And this trend is particularly strong in Europe.
“The private label segment has the highest market penetration in Europe, followed by North America,” says a Statista spokesperson. “Depending on the country, the private label segment makes up between 21% and 52% of supermarket sales in Europe.”
But how have supermarkets so successfully changed the narrative on private label products, taking them from underdog to competitor? The first driver is cost.
How have private label products become powerful?
“This trend is largely fuelled by [Europe's] ongoing cost-of-living crisis, which has prompted consumers to mitigate financial pressures through smarter spending, increasingly opting for private label goods that are typically more affordable,” says Mintel's Witham.
"A significant portion of grocery shoppers are purchasing more own label products."
“A significant portion of grocery shoppers are purchasing more own label products,” says Witham. “For example, between 18% and 23% of shoppers in countries such as Spain, the UK, France, Germany and Italy have increased their purchases of standard own label food and non-alcoholic beverages over the past year."
What’s more, consumers are actively making the decision to move away from independent brands.
“Approximately three in 10 European grocery shoppers report buying fewer branded products, highlighting a broader shift toward own brand alternatives," says Witham.
Interestingly, this trend is continuing to grow, proving that consumer loyalties have switched on a more permanent basis, even as Europe’s economic recovery strengthens. And the reason for this is quality.
"Over the years, the quality of private label products has improved significantly, resulting in a positive shift in consumer perception,” says Witham. “Today, many consumers view own label products as comparable, if not superior, to branded goods in terms of quality.”
This has been supported by the introduction of premium ranges, such as Tesco Finest, Sainsbury’s Taste The Difference and Carrefour's Reflet de France, which have elevated the status and appeal of private label offerings.
“Retailers have worked hard to invest in their private label strategies and shift the perception beyond basic value-for-money options,” said a spokesperson for market insight firm NIQ. “This has included introducing wider ranges of products while brands scale-back, rebranding packaging and lines and messaging to appeal to a wider range of shoppers and investment in strong omnichannel experiences that can compete with big name brands.”
And consumers are responding to the increased focus retailers are putting on their private label product ranges.
“Consumers have recognised that private label products can offer comparable or superior quality and value compared to the national brands they used to buy, which is why they have made the switch,” says a Statista spokesperson.
This information will serve as a major concern to manufacturers who rely heavily on brand loyalty as brand development company Qualtrics says, “brand loyalty could mean the difference between meeting or missing revenue targets”.
What’s next for private label?
Private label products are proving their power in food and beverage with increasing market share and customer loyalty. And while this is good news for supermarkets, it spells trouble for independent brands that are already suffering waning consumer interest. Take Nestlé's downgraded full-year financial forecast, triggered by a weak market.
"Private label products do pose a genuine threat to independent brands in terms of market share. As consumers increasingly prioritise value and affordability, private label products are becoming more competitive, often offering similar quality at lower prices,” says Mintel's Witham.
Another winner in the rise of private label brands are consumers, who are benefitting from the competition in the market.
“This shift is pushing independent brands to innovate and provide additional value to retain their market position," says Witham.
Currently, crisps, snacks, cereal, biscuits, sweets and bread are at the top of the list of foods consumer are making the switch on, according to Statista. However, that could change as supermarkets understand the full potential of private label products and extend their range.
“Consumers and retailers are now seeing the value in investing in own-label products,” said a spokesperson for food and beverage merchandiser Dee Set. “Because of this, retailers will continue to expand their efforts expanding and freshening up their offerings."
