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Shift to private label continues across Europe with UK leading the way

A new study shows that private label continues to grow across Europe and is now outperforming brands in the majority of markets as retailers up product quality in a bid to drive differentiation and loyalty.

IRI’s analysis of eight major Western economies markets (UK, France, Germany, Greece, Italy, Spain, Netherlands and the US) showed that private label value share across EU markets grew 4% last year and now stands at 39.4%.

IRI found that individual country performances vary widely with private label value share highest and growing most in the UK (52.5%), Spain (42.6%) and Germany (40.1%), and value share lowest in Italy (18.1%) Greece (16.3%) and the US (14.9%). France and Greece are the only countries showing value share declines of -0.7pt and -0.3pt respectively, largely due to the legacy of brand price wars. The Netherlands share of 29.2% remained unchanged yoy.

In the UK, private label share has grown for the fourth consecutive year, partially due to consumers switching as prices rise, but also as premium ranges showcase quality credentials and expand further.  Retailer range cuts are also continuing in a bid to reduce complexity and cost, with brands being culled ahead of private label.

Meanwhile, IRI highlighted that ‘shrinkflation’ exercised by some major UK brands – in the wake of higher ingredient costs due to the fall in the value of the pound – has not been lost upon consumers and partly helped to trigger trade out from brand to private label.

The research found that homecare and personal care products delivered the most notable share gain in the UK last year, as recessionary behaviour extended to household products.  Ambient saw the second biggest value share increase, with range expansion in on-trend categories such as savoury and sweet snacks evident. Alcohol value grew despite dynamic growth of branded premium beers/spirits yoy, with private label wins in wines, sparkling wines, and emerging ready to drink mixes.

Ovverall, IRI’s report points to three key reasons for the growing success of private label across Europe:

·         Private labels’ evolution to ‘private brand’ – innovative, consumer-focused ranges offering a finely poised balance between price and quality, which in turn earned more trust from shoppers who continue to search out the best value for money.

·         Retailers capitalising on changing shopper trends – expanded ranges with investment concentrated on premium tiers in categories such as chilled ready meals, healthy snacking, affordable facial cosmetics, healthier food ranges, helping sway savvy shoppers from brands.

·         A broadening retail landscape – Growth of discounters, specialist retailer banners, and now the latest big wave of disruption courtesy of Amazon and Google who continue to expand their FMCG footprint at pace.  With this, the online giants are creating a platform ripe for further PL expansion.

Olly Abotorabi, Senior Regional Insights Manager at IRI, commented: “As economic prospects improve across the region it’s perhaps surprising to see private label in the ascendancy. Since the 1980s when private label products were often perceived as poor imitations of brands, today they are often the product of choice. Private label has come a very long way.

“Retailers have invested heavily, particularly at the premium end of the market providing improved quality and differentiation in a bid to drive customer loyalty. It’s evident in retailer messaging through to sales growth across a variety of categories. Products are increasingly aligned to evolved shopper habits and virtues whether that’s health, indulgence, portability, sustainability or environmental issues. However, premiumisation and heavy persistent promotional activity from brands is helping them maintain value share. Given the increased product quality, new ranges, emerging channel opportunities and recent buying alliance announcements between retailers, we expect to see private label make further gains.”

IRI’s study also reveals that the price gap between private label and brand is closing across the majority of countries. While the UK is seeing private label price increases, they are still behind the rate of brands. Conversely, private label price declines are ahead in Greece yoy in response to aggressive brand price cuts. The greatest differences are in France, Germany, and least in Italy where private label share is one of the lowest.

Abotorabi concludes: “Our key take outs from the report are that consumers are increasingly intent on searching out value for money, despite improving economic prospects. Expectations are heightened, choice and availability greater across an expanding retail landscape. Retailer and manufacturer collaboration remains vital on the route to developing trusted ‘private brands’. Deeper understanding of pricing, promotion and assortment as levers to drive success and loyalty are essential as the battle to win share of transaction intensifies.”

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