Today’s private labels – unlike the generic offerings of the past – are carefully managed and marketed in order to improve the retailer’s competitive edge. Indeed, many are now seen as brands in their own right. This global report examines new approaches to the development of private label fmcgs in the face of an increasingly competitive grocery landscape. It also looks at the exciting prospects for this sector, as the frugal mindset persists and emerging markets remain virtually untapped.
Despite some ups and downs, in absolute terms the private label market experienced robust growth over the 2007-2012 period, with value sales in the selected fmcg markets growing overall by just under 1/4 to over US$350 billion. This represented around 10% of the total value of these markets combined, a share that remained stable over the review period.
Private label growth has been driven both by the expansion of large grocery retailers and the trend towards more sophisticated lines that command higher prices and margins. Indeed, the emphasis is shifting from aggressive promotion and discounting of private labels to providing better quality and a unique offer.
The influence of economic conditions on the growth of private label was reflected in the data relating to the 2007-2012 period. When the recession first hit developed economies between 2007 and 2008, private label fmcgs flourished as consumers cut expenditure drastically. In 2008, the private label market grew by almost 12% in current value terms, while real GDP increased by just 3%. In 2009, however, the private label market stagnated as the global economy went into recession, with real GDP falling by almost 1% in that year
Following a recovery in the world economy in 2010, when GDP was boosted by 5%, growth slowed to a rate of 4% in 2011. This led to a renewed increase in demand for private label fmcgs, with global sales jumping by 9% in current value. This was also partly attributable to an increase in private label prices in developed markets as a result of quality improvements, as several retailers developed premium ranges that competed directly with branded products.
In 2012, private label sales fell 1% by current value, as real economic growth slowed to around 3%. This was partly due to the response by the major brands, which sought to compete with premium private labels by running numerous price promotions and stepping up advertising.
Furthermore, with consumers no longer under as much financial pressure as they were during the recession, many of those who traded down when money was tight were able to switch back to their favourite brands. Also, with food companies in better financial positions, many invested in new products and innovative new concepts.
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