Brand rivalry deepens in post-crisis Europe

12-May-2015 - Last updated on 13-May-2015 at 14:01 GMT

As big name brands lower their prices to compete with own brands, consumers may go back to buying the premium labels they enjoyed pre-recession, warns Canadean. Own brands should focus on quality to retain their new-found consumer base.

Own-brands have enjoyed a boom in crisis-hit Europe, winning new consumers with both price and quality – but big brands are resorting to aggressive pricing and promotions to win back their old consumer base.

Since the economic crisis, consumer spending habits have been dominated by a thrifty ‘value for money’ approach - meaning many consumers forsook favourite name brands for own-brands or private label brands (PLBs).

And although Europe is slowly emerging from the crisis, changes in consumer attitudes seem to have stuck. Nearly 60% of Spanish consumers claimed to be less brand-conscious compared with five years ago, according to lead Canadean analyst Michael Hughes.

“Consumer attitudes towards private label groceries continue to evolve and favourable perceptions towards store-own brands is not driven purely by financial necessity but also the fact that such products can meet wider need states such as the desire for indulgence and quality,” he told FoodNavigator.

Hughes said that many consumers struggled to tell the difference between national brands and store-own products.

A Canadean survey involving 1,000 Spanish consumers in March this year revealed that 53% believed private label and branded products were produced in the same factory and that only the packaging differentiated them.

But for Hughes, this trend was not limited to Spain.

“Across Europe, quality perceptions towards private label are changing as consumers become less brand-conscious and trusting of major brands, and also show a greater willingness to sample alternative brands because of greater trust in store-own brands.”

Big brands react

In an attempt to win back lost consumers, big name brands have reacted with aggressive pricing strategies and promotions.

But Canadean analyst Raquel Perez-Lopez warned that this could be damaging for all manufacturers.

“As a consequence, both private and branded manufacturers will suffer due to the aggressive discounting. This will not just erode premium credentials of brands, but also means that consumers focus too much on price and promotion and do not evaluate other product attributes such as health and convenience.”

Can own-brands compete long-term?

Perez-Lopez said that store brands should focus on the quality of their products if they are to stand out on the shelf and keep the consumers they won during the recession.

“Private label manufacturers should promote the quality of their goods via clear labelling that states the origin of the product along with the production method. This will encourage consumers to think twice about what product to buy."

Moving away from the plain packaging that has traditionally characterised own-brands, Hughes said that own-brands should use label space to push messages about the product’s quality and provenance.

Meanwhile market research from Nielson last year revealed that this trend towards own-brands was even more entrenched amongst thrifty UK shoppers.

Just over 70% of British respondents thought private label quality had improved over time - compared to 62% of respondents across Europe – while 44% of Britons said they would pay the same or more for an own-brand product if they liked it.