Private label under pressure as UK supermarkets lose sales to discounters – according to new IRI report

Retailers also sacrificing private label products to help reduce range and assortment 
Bracknell, UK – 22 June 2016 – Supermarkets continue to lose private label sales to the discounters, as their value share of private label fell in the UK, according to a new report – ‘Private Label in Western Economies’ – launched today by IRI, a leading provider of FMCG market intelligence and predictive, actionable insight. 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.
Overall, 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. According to IRI Infoscan data [y/e 27th Dec 2015 vs. y/e 28th Dec 2014], UK supermarkets also experienced this downward trend with a decrease of -0.4 points in value share, as they struggled with challenging market conditions and greater spending on promotions by national brands.
However, in total, UK retailers had positive growth of +0.4 points rise to 51.8% in private label value share as measured by Kantar Worldpanel UK (which includes a growing discounter channel and other big private label food retailers, such as M&S).
While there are encouraging signs of economic growth in Europe, with GDP up +1.7% for 2015, wage inflation and unemployment slowing or stabilising, the story for the UK is one dominated by shoppers moving to the discounters, as Aldi and Lidl look to increase their share of grocery spend and compete directly with supermarkets’ private label products, primarily from the economy range.
The largest UK retailers are also reducing their range of items stocked to simplify their offering to shoppers and help reduce costs. The overall average reduction across 2015 was -5%, but in one major multiple it was -10%. Although private label ranges have been reduced more quickly than national brands, national brands are seriously impacted, as FMCG retailers and manufacturers focus on cutting their range and assortment to encourage higher performance amongst categories and brands.
Tim Eales, Director of Strategic Insight at IRI, comments: “We’ve seen an over-abundance of products on the shelves across many of the countries, not just the UK – there is simply too much choice for the average consumer today and private label is often the victim of cuts to the number of products that appear on store shelves. Retailers 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 – whether that’s private label or national brands.”
The report also reveals that the price gap between private label and national brands is closing and so price could have reduced incentive for UK shoppers looking to supermarkets’ private label products to save them money. On average, packs of private label products sell for 30% less than national brands. This index has increased for food and reduced for non-food, but overall has hardly changed in the latest year. A similar measure, covering thousands of individual pack prices, IRI’s UK shopping basket, shows that private label prices are slowly getting closer to national brands’ prices as private label trade promotion support is reduced.
Tim Eales adds: “While the UK has a very healthy private label value share of the total FMCG market, there seems to be a level of uncertainty over whether it will maintain this over the coming year. With retailers reducing their ranges and withdrawing promotional support for private label, and shoppers with more money in their pockets potentially feeling that they can afford national brands again, this will be to the detriment of private label. But then again uncertainty over the EU referendum might just swing it the other way as the consumer looks to save money again.”
Category trends – value share in the UK (in 2015 vs. a year ago)
  • Frozen foods private label share is rising, up +0.6 points to 47% – despite losing unit share, private label frozen foods are increasing in price as promotional support reduces. This is increasing the relative price.
  • Household private label share is rising, up +0.7 points to 26.8% – supermarkets have been hit by customers buying branded household products in bargain stores, such as Poundland.
  • Ambient Food is also up +0.3 points to 29.9%.
  • Chilled and Fresh Food saw the biggest drop, down -1.4 points to 55.4% value share. Tesco’s new ‘Farm’ rebranding of its private label lines could, if successful, stimulate more branding in the produce and fresh categories where private label is dominant. 
Find out more in the IRI Special Report ‘Private Label in Western Economies’, click here to download the report.
Notes for editors:
Other country trends
  • For French retailers and manufacturers 2015 was a difficult year in a context of price war, which has impacted private label performance. All categories struggled, and from 2010 to 2015 while national brands grew 12.8% in value, private label saw a decrease of -1.0 value share points to 34.1%.
  • In Italy, a tough year resulted in a value share decrease of -0.2 points to 17.2%, but there has been investment in premium private label assortment (by product and category) giving shoppers trade-up options.  
  • 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 2015, total private label unit market share was stable in the Netherlands, yet total private label value share is now under pressure, having decreased -0.3 value share points to 39.9%. Retailers introduced lower value private label products to halt the growth of hard discounters, but this has not been that successful as the quality was not comparable to that of the hard discounters.
  • Private label spend decreased in the USA taking its value share to 16.4%. High-end private label ranges are popular but an increase in promotions may have been a factor in its value share decrease.
  • Private label share in Australia is lower (13.9%) than in many European countries and retailers are keen to improve private label presence and share.
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.
About IRI:
IRI is a leader in delivering powerful market, consumer and media exposure intelligence and actionable insight from predictive analytics. It goes beyond the data to ignite extraordinary growth for its clients in the FMCG, retail and over-the-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businesses. Follow IRI on Twitter.
For further information please contact:
Amanda Hassall, Eureka Communications
Tel: +44 (0)1628 822741; Mob: +44 (0)7855 359889

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