Price wars, brand promotions and shopper behaviour are all challenging the role of private label in western economies, according to a new study by IRI.

The report – ‘Private Label in Western Economies’ – analyses private label sales trends and price and promotions across six countries in Europe (France, Germany, Italy, Spain, the Netherlands and the UK), as well as in the US and Australia.

Private label’s value market share in Europe fell by 0.6 points to 38.3% in 2015, compared to the previous year as a share of the total FMCG market. This highlights both a downward trend and the fact that retailers and manufacturers are struggling to cope with challenging market conditions, including pressure from a growing discounter channel, as well as national brands pumping large amounts of money into promotions. Private label market share measured by pack sales also dropped by 0.5 points to 47.4% last year.

IRI said that while there are encouraging signs of economic growth in Europe, the story for private label tends to differ from country to country, suggesting that shoppers’ decisions about whether to buy private label over national brands vary according to national choices and preferences.

France, for example, saw the highest private label share decrease of all the eight countries in 2015, but still with a robust private label value share at 34.1%, compared to Italy’s 17.2% value share and Australia’s 13.9% value share.

The UK remains the country with the strongest penetration of private label with a value share of 51.8% in 2015, increasing by 0.4 points versus previous year, as measured by Kantar Worldpanel UK, which includes the discounter channel and other big private label food retailers, such as M&S.

The IRI report also points to the fact that supermarkets are losing private label sales to the discounters, primarily from the economy end of their private label ranges. France saw a strong decrease in the private label economy tier (-5.6% in value sales and -6.8% in unit sales) as well as from the standard (-3.5% in value sales and -3.8% in unit sales) tier, which diluted healthy growth coming from the premium ranges (+2.8% in value sales and +3.0% in unit sales).

“The report presents an interesting picture, despite a decrease in private label value and unit market share overall,” commented report author, Tim Eales, Director of Strategic Insight at IRI. “Economy ranges are facing big challenges – not least from the discounters, but also in the minds of shoppers who tend to equate ‘economy’ with ‘low quality’ – but it seems that premium private label is actually growing. This is where retailers should be focusing their attention in order to win shoppers hearts’ and minds when it comes to private label.”

The IRI report also highlights that private label assortment is shrinking across Europe, a trend that is also impacting national brands, as FMCG retailers and manufacturers focus on cutting their range and assortment for higher performing categories, brands and point of sales.

Eales added: “We’ve seen this over-abundance of products on the shelves across many of the countries – there is simply too much choice for the average consumer today and private label is often the victim of cuts to products that appear on store shelves. Retailers and manufacturers need to put in place the right strategies to help them focus on what shoppers want, but also to understand the impact of their decisions when it comes to reducing assortment and range.”

The full ‘Private Label in Western Economies’ report is available to download from the IRI website

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