Private Label - Potential in a Weakening Economy

Strategy Briefing

About This Report

Nov 2008

Where is private label going? Is there a consumer backlash against the retailer brand or is the increasing drive to individualism entirely satisfied by the retailers’ extended offer? Using Euromonitor International’s unique global database of markets and this report’s exclusive mapping of the share retailer brands as a framework, this bumper global analysis considers the impact of private label retailing on manufacturers, their operational/cost factors and consumers.

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Private Label - Potential in a Weakening Economy

What this report includes

  • Top-level strategic analysis of how major consumer trends will influence global markets
  • Consumer insight
  • Impact across all relevant consumer markets
  • Unique graphics and case studies
  • Key market snapshots
  • Accompanying presentation to synthesise main findings
     

Why buy this report

  • Identify factors driving change now and in the future
  • Understand motivation
  • Forward-looking outlook
  • Briefings and presentation should provoke lively discussion at senior level
  • Take a step back from micro trends
  • Get up to date estimates and comment

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Private Label - Potential in a Weakening Economy

EXECUTIVE SUMMARY

Drivers
Chart 1 Factors Influencing Private Label Growth 2008
The Private Label Market
Chart 2 Leading Markets for Private Label 2007
Sector Trends
Chart 3 Global Private Label Sales by Sector 2007
Outlook
Summary 1 Opportunities and Challenges for Private Label Retailers

INTRODUCTION AND OVERVIEW

Definitions
An evolving concept
Summary 2 Types of Private Label 2008
Private labels become viable brands
The Private Label Consumer
The affluent seek bargains
Private label gains support from younger shoppers
Types of Private Label Retailer
Overview
Grocery retailers
Mixed retailers
Specialist retailers
Non-store retailers
Summary 3 Types of Private Label Retailer

MARKET DRIVERS

Influence of the Economy
Private label adapts to good and bad times
Economy held strong until 2007
The credit crunch explained
Euro economy remains flat
Emerging markets drive growth
Chart 4 Global GDP Trends 2002-2007
Total Retail Sales
US dominates global retail expenditure
Japan ranks second but growth is slow
China witnesses dramatic growth
European retail market headed by UK
Emerging markets see triple-digit growth
Table 1 Total Retail Sales and Growth by Market 2002/2007
Retailer Consolidation
Retailing most concentrated in Western Europe
Largest formats are the most concentrated
Chart 5 Global Concentration in Key Retail Formats 2006
Leading players
Summary 4 World's Leading Retailers 2007
International Expansion
A more targeted approach to expansion
Wal-Mart and Carrefour leave South Korea to Tesco
Eastern Europe an area of focus for European retailers
Chart 6 Leading Retailers: Internationalisation
Trend Towards One-stop Shopping
France has highest penetration of supermarkets/hypermarkets
US market remains fragmented
Asia still characterised by informal retailing
Table 2 Penetration of Supermarkets/Hypermarkets by Market 2002/2007
Changing Perceptions of Value
Discounting becomes the norm
The emergence of "PRAVs"
North Europe leads hard discounter trend
Discounters spread to Eastern Europe
UK consumers turn to Aldi
Carrefour leads discounter revolution in Spain
Table 3 Penetration of Discounters in Selected Countries 2002/2007
Demand for Convenience
Tesco and Marks & Spencer develop urban formats
Convenience concept big in Japan
Table 4 Penetration of Convenience Stores in Selected Countries 2002/2007

THE PRIVATE LABEL MARKET

Market Trends
Global trends
Growth underpinned by retailer expansion
Chart 7 Private Label Market for fmcgs by Value 2002-2007
Trends in developed markets
Table 5 Leading Markets for Private Label by Value 2002/2007
Trends in emerging markets
Private Label Shares: Overview
Private label share still highest for commodities
OTC and beauty remain difficult areas to penetrate
Table 6 Private Label Shares by FMCG Market 2002-2007
Private Label Shares: Trends by Sector
Disposable paper products
Table 7 Disposable Paper Products: Private Label Shares by Sector 2002-2007
Packaged food
Table 8 Packaged Food: Private Label Shares by Sector 2002-2007
Pet food
Table 9 Pet Food: Private Label Shares by Sector 2002-2007
Household care
Table 10 Household Care: Private Label Shares by Sector 2002-2007
Soft drinks
Table 11 Soft Drinks: Private Label Shares by Sector 2002-2007
Alcoholic drinks
Table 12 Alcoholic Drinks: Private Label Shares by Sector 2002-2007
OTC healthcare
Table 13 OTC Healthcare: Private Label Shares by Sector 2002-2007
Cosmetics and toiletries
Table 14 Cosmetics and Toiletries: Private Label Shares by Sector 2002-2007
Domestic electrical appliances
Table 15 Domestic Electrical Appliances: Private Label Shares by Sector 2002-2007
Clothing and footwear
Private Label Services
Financial services
Mobile phone services

TRENDS IN KEY MARKETS

France
Overview
Market trends
Table 16 France: Private Label Shares by Market/Sector 2002-2007
Germany
Overview
Market trends
Table 17 Germany: Private Label Shares by Market/Sector 2002-2007
Japan
Overview
Market trends
Table 18 Japan: Private Label Shares by Market/Sector 2002-2007
Poland
Overview
Table 19 Poland: Premium Private Labels 2008
Market trends
Table 20 Poland: Private Label Shares by Market/Sector 2002-2007
Spain
Overview
Market trends
Table 21 Spain: Private Label Shares by Market/Sector 2002-2007
UK
Overview
Market trends
Table 22 UK: Private Label Shares by Market/Sector 2002-2007
US
Overview
Table 23 Private Label Shares in Selected US Cities 2008
Market trends
Table 24 US: Private Label Shares by Market/Sector 2002-2007

RETAILER DEVELOPMENTS

Overview
Why develop private labels?
Size matters
Building trust overseas
Importance of private label
Chart 8 Private Label as % Total Sales by Selected Retailer 2006
Types of Brand
Umbrella retailer/fascia brand with sub-brands
Non-fascia umbrella brands
"Fantasy" brands
Mixed strategies
Multi-branding in the non-food sector
Rationalisation and repositioning
Summary 5 Summary of Private Label Strategies
Private Label Segmentation
Premium ranges
Summary 6 Premium Private Labels 2008
Children's ranges
Healthy eating ranges
Food for intolerances ranges
Organic ranges
Summary 7 Organic Private Labels 2008
Ethical ranges
Going Green
Tesco introduces carbon labelling
Sainsbury qualifies for Flower label
Wal-Mart promotes compact fluorescent lights
Office Depot launches green stationery
Expansion and Innovation
Extending the non-food offer
Supermarket clothing gains major brand status
Focus on innovation
Retailers step up new product development
Involving the consumer at the development stage
Buying and Selling Private Labels
Safeway licenses its private labels
Branding Partnerships
Character co-branding
Celebrity/professional co-branding
Collaboration with designers
Packaging Strategies
Trends in materials
Labelling developments
Pricing Strategies
Price differentials
Pricing methods
Advertising and Promotion of Private Labels
Overview
Loyalty cards
Merchandising
Celebrity endorsement
Sourcing Private Labels
Overview
Aldi passes the taste test
Sourcing from low-cost countries
Ownership of suppliers allows for greater control
Contracting out remains most flexible option
Cooperatives and buying groups

SUPPLIERS AND THEIR STRATEGIES

Major Players
Soft drinks – fragmented supplier base
Foods – dominated by small specialists
Disposable paper products – SCA dominates in Europe
Household cleaning products – McBride remains supplier of choice
OTC products supplied by generic specialists
Summary 8 Selected Major Private Label Suppliers 2008
Manufacturer Strategies
Advantages to supplying private label
Disadvantages to supplying private label
Multinationals' strategies
Benefits to small companies
Offering value added services
Innovation
Industry Consolidation
Pet food production becomes more concentrated
McBride acquires Henkel's private label business

OUTLOOK

External Demand Factors
Economies to remain depressed in short term
UK outlook is gloomy
Glimmer of hope?
Table 25 Forecast GDP Growth in Selected Markets 2008-2013
Large retailers to increase dominance
Plans for expansion
Table 26 Forecast Penetration of Supermarkets/Hypermarkets by Market 2007/2012
Table 27 Top Ten Growth Markets for Supermarkets/Hypermarkets 2007/2012
Discounters also set for rapid growth
Plans to penetrate US market
Table 28 Forecast Penetration of Discounters by Market 2007/2012
Trends to Watch
No turning back for private label
Innovation will be key
Adapting to changing market conditions
Expanding private label into new sectors
Stepping up the marketing effort
Seeking out good suppliers
Forecasts
Europe to experience gradual growth
US market to take off at last?
Affluent middle classes to drive growth in developing markets
Forecast private label penetration by sector
Table 29 Global Private Label Shares by Sector 2007-2012