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Retail landscape change offers further growth opportunities for Private Label

By Olly Abotorabi
 

I’ll hold my hands up. Whether it’s searching the aisles or touchscreens for more indulgent dining-in options, new and exciting snacks, or saving money on products within health or homecare, private label (PL) is firmly on my radar.

Searching out value for money or a bargain is no longer uncool. PL has moved from imitator to a brand in its own right, facilitated by improved product quality, the rise of the discounter, and direct responses of grocery players in a bid to win back shoppers. Our latest PL (private label) study reflects a growing number of shoppers picking up private label products across the EU and the USA. 39.4% of FMCG value across IRI EU countries is generated by retail own products - an increase of +0.4 pts yoy.

Increased reflexivity to changing consumer needs is evident, be it private label dominated stores such as Carrefour’s Bon App in France, innovative and expanding retailer brands such as Mercadona’s Hacendado in Spain or the numerous expanding premium tier grocery ranges covering free-from and organic categories across the region.

Premium tier evolution within PL chilled meals is a key factor in retailers gaining a greater slice of market value. This is evidenced across most markets, even in Italy where shoppers are renowned for prioritising fresh food ingredients, yet show signs of succumbing to convenience and enhanced quality, helping PL win more share of wallet YoY.

So what of the future? Brands simply won’t sit back. Renewed efforts to innovate, promote, drive and build loyalty can be expected and they’ll be necessary given the transformation of the FMCG marketplace.

Hard discounter expansion, emergence of pure players specialising in cosmetics through to frozen food will continue to catapult PL to the forefront of shopping lists and see competitors across the region raise their PL game to compete and win shopper loyalty.

The latest wave of retail disruption is led by online giants Amazon and now Google. While the opportunity for private label and brands to expand their footprint here is real, the former expects to accomplish $4 billion in (all-inclusive) own brand sales by the end of this year and make no secret of intent to build their mix of Amazon Brands.

Growth of the above channels has forced conventional grocery retailers to react. A spate of grocery buying alliances, retailer acquisitions and distribution deals have been announced since the turn of the year, each with the focus of driving down cost and delivering a more competitively priced PL.

Sainsbury’s takeover of Asda has promptly been followed by Carrefour’s 5 year buying partnership with Systeme U and Auchan’s tie-up with Casino retail group in France. Tesco’s proposed alliance with Carrefour is the latest strategic move to take on discount and online and with it reduce costs, sustain growth of PL with greater expertise and differentiation.

This doesn’t mean online and traditional retailers will simply chip away at each other from either side of the fence. Alliances with Amazon from the likes of Whole Foods (US) Morrisons (UK) and Casino’s Monoprix banner (FRA) will help grocery players attain varying degrees of exposure online.

Ultimately for Grocery players across the region PL quality and innovation must not slip now, otherwise the route to retaining shoppers may quickly lose momentum for some.

Price can’t be the only lever in the battleground between, retailers. Other ways to drive standout and loyalty exist. Initiatives that put consumer shopping interests at the heart of decision making such as focussed product innovation, evolved instore experience or reduced plastic packaging, could prove to be beneficial as the battle for share of transaction intensifies.

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