The New Face of Private Label: Global Market Trends to 2018

January 2014

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.

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Consumers seek value when times are hard

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.

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

Delivery format

This report also includes a PowerPoint executive summary document.

PDF/Word copies downloadable from you MyPages account

EXECUTIVE SUMMARY

Demand factors
Attitudes to private label
The private label market
Chart 1 Private Label Shares by Fmcg Market 2012
Private label strategy
Outlook
Summary 1 Opportunities and Challenges in Private Label Fmcgs

INTRODUCTION

Advantages of private label
An evolving concept
Types of private label
Importance of private label within the product mix
Summary 2 Types of Private Label 2013

MARKET DRIVERS

Economic uncertainty
Private label boosted by recession Australians become the highest earners Chart 2 Per Household Annual Gross Income by Country 2007/2012 Chart 3 Per Household Annual Gross Income by Country: % Growth 2007/2012 China drives growth in retail sales Table 1 Store-based Retail Sales by Market 2007/2012
The modernisation of the grocery network
Chart 4 Grocery Retailer Sales by Type 2008/2013
Supermarkets/hypermarkets
Focus on growth in emerging markets Channel reaches maturity in Western Europe Chinese market remains highly fragmented Russia dominated by domestic players Penetration still low throughout rest of Asia Turkey sees rapid modernisation Table 2 Penetration of Supermarkets/Hypermarkets by Country 2008/2013
The rise of the discounters
Still strongest in Northern Europe Poland sees most rapid growth Discounter concept takes off in Turkey... ...And spreads to the US and Australia Table 3 Penetration of Discounters by Country 2008/2013
Convenience stores
Penetration still highest in Japan “Big four” take over convenience channel in the UK Convenience store concept remains undeveloped in China Table 4 Penetration of Convenience Stores by Country 2008/2013
Leading grocery retailers
Scale needed for private label development Wal-Mart rules the roost Carrefour exits discounters, while Tesco creates smaller formats Seven & I sees rapid international expansion Kroger remains firmly in the US Chart 5 Top 20 Grocery Retailers by Market Share 2013
Retailer consolidation
US sees surge of activity European retailers turn attention to emerging markets Asia grocery network remains highly fragmented Summary 3 Mergers and Acquisitions Among Grocery Retailers 2012-2013
International expansion
Creating a wider distribution base for private labels Differing levels of internationalisation French retailers have broadest reach Discounters go further afield Summary 4 International Grocery Retailers 2013

THE PRIVATE LABEL CONSUMER

Purchasing habits
Private labels purchased by most shoppers Urban Indians most likely to have increased private label purchase in 2013 Concept still relatively unknown in Russia Chart 6 Purchasing of Private Label in the Last 12 Months, by Country 2013 Chart 7 Purchasing of Private Label in the Last 12 Months, by Country 2011/2013 Private labels appeal most to families Chart 8 Purchasing of Private Label in the Last 12 Months, by Age Group 2013 Similar trends expected in 2014 Chart 9 Purchasing of Private Label in the Next 12 Months, by Country 2013
Polarisation of demand
Perception of private labels
Private label image strengthens in UK and US Commodities seen to be of equal quality
Attitudes towards price/quality ratio
More than a third of consumers think private label can be superior Private label perceptions weakest in Asia and the Middle East and Africa Chart 10 Attitudes Towards Private Label by Region 2010

PRIVATE LABEL MARKET OVERVIEW

The global picture
Private label share remains steady at 10% Consumers seek value when times are hard Chart 11 Global GDP V Fmcg Private Label Growth 2008-2012
Broad sector trends
Price gap narrows Private label share remains strongest in commodities Chart 12 Global Private Label Shares by Market 2007-2012 Table 5 Global Private Label Sales by Market 2007-2012
National trends
The US leads the world by total value Private label penetration highest in Switzerland UK sees a fall in private label sales Spain experiences sharp growth A burgeoning sector in Russia Emerging markets enjoy growth from a small base Table 6 Leading Markets for Private Label 2007/2012 Table 7 Penetration of Private Label by Country 2007/2012

CATEGORY TRENDS

Packaged food, hot drinks and pet food
Chilled foods and ready meals offer most scope for private label Premiumisation of private label pet food Confectionery market remains dominated by big brands Nescafé maintains its grip on the hot drinks market Consumers remain cautious about baby food Table 8 Global Packaged Food: Private Label Shares by Category 2007/2012
Soft drinks
Coca-Cola and PepsiCo leave little room for private label Retailers experiment with more sophisticated speciality products Price gap remains high Table 9 Global Soft Drinks: Private Label Shares by Category 2007/2012
Beauty and personal care
Market remains largely in the hands of specialists Most private labels positioned in the masstige segment Celebrities add credibility to beauty offerings Table 10 Global Beauty and Personal Care: Private Label Shares by Category 2007/2012
Home care
Private labels lack technical expertise and marketing clout Retailers take eco-friendly angle Table 11 Global Home Care: Private Label Shares by Category 2007/2012
Tissue and hygiene
Commodity nature of market lends itself well to private label Private label penetration highest in kitchen towels Retailers introduce more sophisticated features to nappies Table 12 Global Retail Tissue and Hygiene: Private Label Shares by Category 2007/2012

KEY MARKET TRENDS

France
Overview Chart 13 France: Grocery Retail Structure 2012 Private label share highest in tissue and hygiene Retailers find alternatives to aspartame Carrefour enjoys success with new beauty line Table 13 France: Private Label Shares by Market/Category 2007/2012
Germany
Overview Chart 14 Germany: Grocery Retail Structure 2012 More than half of tissue and hygiene sales now private label Three-tier offerings make an appearance in packaged food Pet superstores drive growth in private label pet food Table 14 Germany: Private Label Shares by Market/Category 2007/2012
Japan
Overview Chart 15 Japan: Grocery Retail Structure 2012 Private label strongest in packaged food and hot drinks Chart 16 Japan: Number of Private Label Packaged Food Launches by Major Retailers 2008-2012 Private label ready meals consist largely of bento Table 15 Japan: Private Label Shares in Selected Markets/Categories 2007/2012
Poland
Overview Chart 17 Poland: Grocery Retail Structure 2012 Penetration doubles over five years in tissue and hygiene Private label pet food offerings mushroom Table 16 Poland: Private Label Shares by Market/Category 2007/2012
Spain
Overview Chart 18 Spain: Grocery Retail Structure 2012 Retailers launch basic ranges to appeal to cash-strapped customers Private label fruit juice enjoys success Table 17 Spain: Private Label Shares by Market/Category 2007/2012
UK
Overview The rise of Aldi Chart 19 UK: Grocery Retail Structure 2012 Chilled foods dominated by private label Chart 20 UK: Ready Meals Brand Shares 2012 Retailers lead the way in premium pastas Private label nappies capitalise on the withdrawal of Huggies Pull-Ups Private label beauty steps up a notch Table 18 UK: Private Label Shares by Market/Category 2007/2012
US
Overview The drive for value Quality tests support private label Chart 21 US: Grocery Retail Structure 2012 Private label dairy products are popular US lags behind Europe in terms of ready meals Retailers gain a strong foothold in bottled water Wal-Mart adds to Ol’Roy brand with premium pet food Private labels battle home care giants with eco-friendly lines Table 19 US: Private Label Shares by Market/Category 2007/2012

RETAILER STRATEGIES

Expanding private label ranges
Seeking parity with national brands Discounters place highest importance on private labels Leading supermarkets aim for a more even balance Private label less of a focus for convenience stores Summary 5 Importance of Private Labels to selected Grocery Retailers 2013
Building on the three-tier offer
Shoppers mix and match Upscale retailers go downmarket Discounters join the fray Focusing on economy Summary 6 Leading Grocery Retailers – Private Label Ranges by Tier 2013
The development of specialised lines
New lines focus on freshness and balanced eating Food intolerance products still relevant Summary 7 Leading Grocery Retailers: Specialised Private Label Ranges 2013
Revamping private label lines
Emphasis on quality Asda appeal to public to help revamp Chosen By You Upgrading basic ranges Wal-Mart revamps Great Value
The rise of the venture brand
Reducing reliance on the master brand Carrefour launches independent brands Carrying brands across fascias Summary 8 Leading Grocery Retailers: Venture/Fantasy Brands 2013
Taking private labels into new markets
The need to build trust Good prospects in Eastern Europe Focus on value in Asia Pacific Barriers to entry in India Launching brands abroad Distributing private labels online
Advertising and promotion
Lack of big promotional budgets Tesco Finest sponsors popular TV drama French benefit from new regulations Aldi’s successful “like brands only cheaper” campaign Growing use of social media Merchandising
Licensing and partnerships
Raising visibility and adding credibility Celebrity endorsement Character licensing Co-branding
Emphasis on sustainability
Creating a greener image Provenance becomes all-important
Packaging developments
No more plain packaging Copycat strategy still used by some discounters Innovative designs Aseptic cartons enter the private label arena Labelling developments
Pricing strategies
Price differential varies according to type of retailer The gap narrows
Supplier selection
Maintaining a close relationship is essential In-house production Outsourcing Stepping up quality control Cooperatives and buying groups

SUPPLIER TRENDS

Key suppliers by sector
Cott remains world’s largest supplier of soft drinks Food supply remains extremely fragmented Pet food companies consolidate Tissue and hygiene products produced by big brand companies McBride stays at the top of its game Some big brand manufacturers opt out of private label supply
Industry consolidation
Summary 9 Mergers and Acquisitions among Private Label suppliers, 2013

FUTURE OUTLOOK

Trends to watch
Economic conditions will remain depressed Chart 22 Forecast Global Real GDP Growth 2013-2017 Still room for expansion Supermarkets/hypermarkets to control more than half of grocery sales by 2018 Eastern Europe will see rapid progress Chart 23 Forecast Global Modern Grocery Retailers by Type 2013/2018 Table 20 Forecast Share of Modern Grocery Retailers by Country 2013/2018 Lines between national and retailer brands will become more blurred Improving promotional techniques Potential in emerging markets Reforms may lead to growth in India Chinese market will be slow to take off
Forecasts
Minimal increases in the short term US to see gradual growth Table 21 Forecast Penetration of Private Label by Country 2012/2017
Recommendations
Innovate, don’t imitate Collaborate with rivals Make good use of big data
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