SymphonyIRI asks: Is there a ceiling to private label growth?

The market research organisation’s latest report, Private label growth in Europe 2012​, found that private label products now account for 35.6% of all CPG (consumer packaged goods) sales by value, and 45.1% of unit share.

Private label sales have increased in every food category over the past year, the market researcher found, but growth could soon hit a ceiling in some categories – and this is already being seen in some non-food areas, such as personal care, it said.

“Manufacturers are fighting hard to protect their value and unit market share with clever promotion and pricing strategies, the re-engineering of some lines and the launch of new variants,” ​it said, but added that retailers were becoming more creative too.

Mix of private label and brands​

However, retailers need to be aware that there is effectively a ceiling beyond which private label cannot go, as consumers will still want to buy their favourite brands.

“We are seeing dynamic change in what is already the most mature private label market in the world,”​ said Rod Street, EVP of International Consulting at SymphonyIRI Group.

“However, almost all shoppers will continue to fill their shopping baskets with a mix of private label and brands. As a result in many categories private label could reach a ceiling regardless of how far retailers promote it.”​

There are also psychological factors at play, with most consumers still wanting to treat themselves with branded foods even in the worst financial times.

“Factors such as perceived and real health benefits, the convenience of the packaging, pack size and price all play a role in consumer choice,”​ the report said.

Working together​

One way for both national brands and private label to grow was for retailers and manufacturers to work together, the report said, pointing out that if retailers do not stock consumers’ favourite brands, they will go elsewhere for all of their shopping.

It added that innovation continues to be an important driver of growth, particularly during recessionary periods – yet innovation in national brands has hit a 12-year low, the market researcher said.

Although industry may be playing it safe by avoiding the high failure rates associated with new product developments, innovation can be “as powerful as price and promotion in generating value and unit sales”.​

The report suggests that in order to spur innovation and growth, retailers and manufacturers need to share their consumer insights and the trend data, ultimately boosting sales and brand loyalty.

The full report is available for download via this link​.