Private label under pressure as share of total FMCG market falls – according to new IRI global private label report

Price wars, national brand promotions and shopper behavior all challenging the role of private label on the shelf
Bracknell, UK – 22 June 2016 – Private label is continuing to come under increasing pressure across Europe, according to a new report – ‘Private Label in Western Economies’ – launched today by IRI, the big data and market intelligence expert. The report analyses private label sales trends and price and promotions across six countries in Europe (France, Germany, Italy, Spain, the Netherlands and the United Kingdom), as well as in the US and Australia.

Private label’s value market share in Europe fell by 0.6 points to 38.3% in 2015, compared to the previous year as a share of the total FMCG market. This highlights both a downward trend and the fact that retailers and manufacturers are struggling to cope with challenging market conditions. Private label market share measured by pack sales also dropped by 0.5 points to 47.4% last year.

While there are encouraging signs of economic growth in Europe, with GDP up 1.7% for 2015 and signs of unemployment slowing or stabilising, the story for private label tends to differ from country to country, suggesting that shoppers’ decisions about whether to buy private label over national brands vary according to national choices and preferences.

France, for example, saw the highest private label share decrease of all the eight countries in 2015, but still with a robust private label value share at 34.1%, compared to Italy’s 17.2% value share and Australia’s 13.9% value share.

The UK remains the country with the strongest penetration of private label with a value share of 51.8% in 2015, increasing by 0.4 points versus previous year, as measured by Kantar Worldpanel UK, which includes the discounter channel and other big private label food retailers, such as M&S*.

The IRI report also points to the fact that supermarkets are losing private label sales to the discounters, primarily from the economy end of their private label ranges. France saw a strong decrease in the private label economy tier (-5.6% in value sales and -6.8% in unit sales) as well as from the standard (-3.5% in value sales and -3.8% in unit sales) tier, which diluted healthy growth coming from the premium ranges (+2.8% in value sales and +3.0% in unit sales).

“The report presents an interesting picture, despite a decrease in private label value and unit market share overall,” comments report author, Tim Eales, Director of Strategic Insight at IRI. “Economy ranges are facing big challenges – not least from the discounters, but also in the minds of shoppers who tend to equate ‘economy’ with ‘low quality’ – but it seems that premium private label is actually growing. This is where retailers should be focusing their attention in order to win shoppers hearts’ and minds when it comes to private label.”

The IRI report also highlights that private label assortment is shrinking across Europe, a trend that is also impacting national brands, as FMCG retailers and manufacturers focus on cutting their range and assortment for higher performing categories, brands and point of sales.

Tim Eales adds: “We’ve seen this over-abundance of products on the shelves across many of the countries – there is simply too much choice for the average consumer today and private label is often the victim of cuts to products that appear on store shelves. Retailers and manufacturers need to put in place the right strategies to help them focus on what shoppers want, but also to understand the impact of their decisions when it comes to reducing assortment and range.”

Find out more in the IRI Special Report ‘Private Label in Western Economies’, click here to download.

*Sources: IRI Infoscan hypermarkets and supermarkets for Spain and Italy; Kantar Worldpanel total market 52 w/e 3rd January 2016 for the UK; IRI Infoscan total market including hard discounters for Germany, the Netherlands and France (including Drive); IRI Infoscan total food for the US; IRI total food for Australia: UK Supermarkets data from IRI Infoscan."

Notes for editors:

Category trends across Europe
  • All categories are declining or are stable in value share with the biggest drops shown for chilled & fresh food (-1.3 points), non-alcoholic drinks (-1.0 points) and frozen food (-0.8 points).
  • Frozen food, chilled & fresh food and household are leading categories when private label’s value share by category in Europe is reviewed. Frozen food commanded a 43.0% value market share in 2015, with chilled & fresh food at 39.0% but both are decreasing.
  • Household (31.2%) and pet food (26.5%) remain the best performing non-food categories.
  • Confectionery, personal care and alcoholic drinks struggle to compete in this sector with value market shares of less than 15% in 2015, due to strong national brand affinity with shoppers.
  • Non-alcoholic drinks and chilled & fresh food are facing high promotional activity from brands. Frozen food saw the biggest reduction in promotional activity for private label in all categories.
  • Country trends
  • For French retailers and manufacturers operating in the private label space, 2015 was a difficult year. All categories struggled from 2010 to 2015, whilst national brands grew by 12.8% in value, private label only saw a value increase of 1.5%. Private label growth needs to be encouraged across the country to compete with the promotion pressure coming from brands.
  • The outlook for private label is more positive in Italy with growth in 2015 despite it being a tough year. There has been investment in premium price private label assortment (by product and by category) to provide shoppers with options to trade up.
  • In Spain, national brands were more successful in 2015 than private label. Many Spanish shoppers perceive national brands to be higher quality products and purchase branded items even if it means that they spend more.
  • In UK supermarkets growth from the discounters is depressing sales especially across the private label economy range.
  • In 2015 total private label sales were stable in the Netherlands yet total private label share is now under pressure. Retailers introduced lower value private label products to halt the growth of hard discounters but this hasn’t been that successful as the quality wasn’t comparable to that of the hard discounters.
  • In Germany private label is decreasing (-0.8 point in value share) although it remains high with a value market share and a unit market share at 38.4% and 50.9% respectively. Shoppers tend to accept higher prices for higher quality goods, from national brands and premium private label products, in an extremely price sensitive market where discount formats dominate. As a result there has been slightly more support for branded goods where assortment has grown by 5.0% compared to 3.2% growth for private label goods since 2013.
  • Private label share in Australia is lower than in many European countries and retailers are keen to improve private label presence and share.
  • About IRI:
IRI is a leading provider of big data, predictive analytics and forward-looking insights that help FMCG, OTC health care, retailers and media companies to grow. With the largest repository of purchase, media, social, causal and loyalty data, all integrated on an on-demand cloud-based technology platform, IRI guides over 5,000 clients globally in their quests to remain relentlessly relevant, capture market share, connect with consumers and deliver growth. Follow IRI on Twitter.

For further information please contact:

Amanda Hassall, Eureka Communications
Tel: +44 (0)1628 822741; Mob: +44 (0)7855 359889

Anne Lefranc, European Marketing Director at IRI
Tel : +33 1 30 06 23 62

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