Shoppers turn to private label goods

18 November 2013
LONDON: The price gap between national brands and retailers' private label products has narrowed in nearly all of Europe and the US as retailers raise the price of their own brands and reduce promotions, new research has found.

According to its latest annual review into the FMCG private label market, research firm IRI said Germany was the only market in Europe not to have seen prices narrow while private label value share grew in every country except France.

IRI attributed the narrowing of the gap to a reduction in retailer promotions and to their increased focus on quality, with many re-launching premium products, while at the same time national brands maintained promotional levels.

In Europe, private label products – those goods provided by one company on behalf of another firm's brand – made up 47.1% of all FMCG sales.

They performed particularly strongly in countries where overall FMCG sales were in decline, such as Italy and Greece, or where the annual rate of sales growth was less than 1%, such as Germany, Spain and the Netherlands.

The price gap was found to be closing the fastest in the non-food category as consumers became less brand-sensitive, although French shoppers appeared to resist the rise of private label brands because of concerns over quality.

Tim Eales, director of strategic insight at IRI, advised national brands to "work harder than ever to tell a compelling and shopper focused story" while also improving their category level insight and their localised assortment arrangements.

Consumers are increasingly turning to private label products as they focus on value, he added. "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."

But IRI also found that private label products did not fare well in categories such as tea, chocolate and personal care where shoppers remain very loyal to their favourite brands.

Data sourced from IRI; additional content by Warc staff
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