Private label to grow in Asia

15 August 2013
SYDNEY: Private-label products are set to take off in Asian grocery markets and to reach European levels of market share over the next 15-20 years, a new report has predicted.

Rabobank, the Dutch bank, pointed to the experience of eastern Europe as it emerged from the communist period. This showed that private-label growth was likely to accelerate when private-label market share reached a critical level of between 5% and 8%.

India, said Rabobank, was nearing this threshold in modern food retail, as was China.

Rabobank analyst Sebastiaan Schreijen noted the shrinking time spans in the development of private label in different countries. It had taken 50-60 years to reach a market share of over 40% in the UK, while the Czech Republic and Hungary had taken 20 years to reach half that level.

He argued that as modern retail markets matured in India and China, all the criteria for private-label growth would be met.

"The question is not whether private label in Asia will catch up with European levels, but when," he said in comments reported by Inside Retail Asia.

"Currently, we anticipate it will only take 15-20 years for countries such as India and China to catch up with the standard European private-label penetration rate of 28%," he added.

Although China appears better placed to see this development, having a well-advanced roll-out of modern food retail, Rabobank expected private-label to gain the most in India in the coming years, with few bottlenecks and market reforms speeding the process.

The rise of private label is likely to be pushed by retailers themselves, rather than being demanded by consumers, primarily as a tool support themselves in price negotiations with branded suppliers.

Other criteria Rabobank identified for private-label success included the need for a competitive cost and a degree of consumer acceptance.

Data sourced from Inside Retail Asia; additional content by Warc staff
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