Store Brands Flex Muscles Around the World
By Lynne Cooke
Shoppers around the world have taken many steps to stretch their family budgets during the recession. For example, they ate at home more frequently or reduced or eliminated vacations. While improving economies may prompt consumers to return to restaurants or go on holiday, one trend that looks likely to remain – and perhaps even grow – is the shift to private label goods.
A 2010 global online survey conducted by The Nielsen Company reveals that six of ten (60%) of consumers across 55 countries from Asia Pacific, Europe, North America, Latin America and Middle East/Africa (consisting of countries from Saudi Arabia, Pakistan, United Arab Emirates, Egypt and South Africa), say they are stocking cupboards with more store brands as a result of the economic downturn. Across the regions, Latin America led the way at 66% and the Middle East/Africa/Pakistan area trailed at 51%.
The highest levels of private label purchase intent during the economic downturn were reported by consumers in Colombia, Spain, Portugal and Greece at 80%, 79%, 74% and 70% respectively, reflecting recessionary realities, depressed export activity and raging deficits. Meanwhile, the lowest reported drift toward private label came from consumers in Sweden (70%), Thailand (62%), Hong Kong (60%) and Denmark (59%) who indicated they did not purchase more store brands during the recession.
While econometric pressures are driving many value-oriented consumer shopping decisions, it is just one factor influencing private label purchasing. A strong push from retailers and improvements in both quality and selection are contributing factors. It should also be noted that not all private label categories are alike. Store brand share varies widely by category and they still represent the minority stake when compared to premium brands.
Store brand share is typically strongest in commodity categories like milk, fresh eggs, rice, edible oil, vinegar and sugar/substitutes or in those with little differentiation (first aid and wrapping materials). Store brand share is usually the lowest among categories where there is strong marketing support for top brands (for example, candy, gum, beer) and those where a high-level of innovation occurs (for example, detergents, deodorant, cosmetics).
Staying Power
Nearly nine of ten shoppers (88%) globally said they intend to keep buying private label even after the economy improves, suggesting that store brand quality has reached parity with national brands and delivers on consumer expectations. While Latin American and Middle East/Africa levels were slightly less than the global average at 83% and 79% respectively, the overwhelming majority still intended to pursue a value strategy.
Countries with the most value-conscious consumers on the private label dimension included Austria, Germany and Sweden, all registering a better than 95% intent to continue purchasing private label, while more than one-quarter of shoppers in the Ukraine (31%), Pakistan (28%), the United Arab Emirates (27%) and Venezuela (27%) had no intention to buy private label in the future.
The economic downturn prompted many consumers to try private label goods for the first time, and once they did so, they discovered that not only was the pricing right, but the quality of the goods met or exceeded expectations. Regardless of the pace of economic recovery, retailers continue to have a tremendous opportunity to convert shoppers to private label for the long term.
Here is a regional round-up:
Europe Private label continues to show solid performance in most European nations, with Switzerland, the United Kingdom and Germany leading the way reporting 2009 store brand value shares of 46%, 43% and 32% respectively. While year-over-year growth was relatively flat or minimal, Turkey and Spain boasted the biggest year-over-year increases of 2.7% and 2.5% respectively.
Latin America Private label continues to have a stable presence in the region. In Chile, store brands represent 8.4% of the market as of April 2010. Market share remained relatively flat in Argentina and Mexico, reporting shares of 7.6% and 6.6% respectively during the rolling year ending April 2010. While Mexico’s private label market share was flat, sales grew 23% compared with the previous period (April 2009). Store brands in Brazil have 4.9% of importance (YTD April 2010).
The categories where private label market share are strongest varies dramatically by country. In Argentina, the top five categories are dominated by foods such as fish, pasta, ice cream and vegetables, while in Chile, four
out of the top five are non-food categories (clothes hooks, candles, pots/pans and cotton swabs). In Mexico, sugar and pies hold the greatest market share, but disposable plates, glasses and place settings round out the top five.
Asia Pacific In most Asian markets, private label is still relatively undeveloped with only Hong Kong having a share above 5% overall. There has been significant investment by many leading retail chains into launching new private label products over the last five years and they are gaining acceptance particularly in the basic commodity categories. In these categories, such as cooking oil, rice, bathroom tissue, market shares can reach up to between 20% and 30% in some countries.
Asian consumers are still largely brand loyal and retailers will need to increase their private label marketing support to build consumer trust in their own brands. During the economic downturn in 2009, there was strong private label growth in many countries. For example, in Thailand, private label grew by over 25%, as shoppers increasingly looked for value when buying grocery products.
In the Pacific markets of Australia and New Zealand, private label is much more established with the majority of households regularly purchasing private label products, which account for up to one-quarter of all supermarket sales.
North America Private label has taken off in the U.S. For year ending July 2010, store brand unit sales reached an average 22% share across all departments, with share gains in all but dairy. Store brand unit shares range from a high of 40% in the dairy department to a low of less than 1% in alcoholic beverages.
In Canada, private label represented $11.4 billion in national sales for year ending July 2010, which is 18.3% of overall consumer packaged goods spend. Over the past year, private label share has declined slightly with overall dollar sales flat, while the total market increased +3%.
Middle East Middle Eastern consumption patterns often run counter to the West for a variety of reasons, and respondents in the region indicated the least likelihood of purchasing private label today or after economic recovery. However, as awareness has increased over the last few years, volume is growing—albeit from a very small base. While only 18% of shoppers in the United Arab Emirates perceive private label as a better value for the money, certain categories such as household cleaners are regarded more favorably. Fully, one-fourth (26%) of shoppers in Saudi Arabia consider these store brands as worthy.
Biscuit Maker Expands CHEP Contract
Jules Destrooper, the internationally renowned West Flemish biscuit manufacturer, has expanded its contract with CHEP, a pallet and container pooling service. The long-time CHEP client has systematically reduced its use of white exchange pallets in favor of CHEP pallets. Until recently, Destrooper used 3,500 CHEP 1200x1000 millimetre pallets per year for deliveries to the Netherlands and the U.K., where this is the standard platform.
Following the expansion, Destrooper will also deliver almond thins, butter crisps and other delicacies from the Destrooper range on CHEP 1200x800 millimetre Euro pallets, an estimated total of 30,000 pallet movements per year. Destrooper will ship these from its distribution centre at Ypres in the Westhoek region of Belgium to its customers in Belgium, France and Poland.
Will Mineral Make-Up Succeed Globally?
Over 30% of consumers are concerned about the credibility of natural and organic claims made by cosmetic brands, says Datamonitor, despite the high demand for natural make-up. The research from the independent business analyst reveals that that this could impact on the continuing success of mineral make-up, which has seen the number of new launches in the U.S. increasing every year since 2005 with nearly 160 in 2009 alone. The strength of the market in the U.S. has come from the popularity of Bare Escentuals.
“While we expect Bare Escentuals to continue their U.S. success in Europe and Japan, particularly after being bought by the Japanese company Shiseido earlier this year, the brand will need to be careful to continue to set itself apart and keep the high levels of consumer trust to ensure they stand out in a market which may be in danger of saturation,” said Vicky McCrorie, consumer analyst at Datamonitor. “With no official validation for mineral make-up, consumers will start to become skeptical as more and more brands launch make-up with mineral claims. Therefore, only the brands which have built the strongest trust with consumers like Bare Escentuals will continue their success.”
Brits Turn to Allergy Remedies
Almost half of British adults are allergy sufferers with hay fever topping the nation’s allergic conditions, according to research by Mintel. A staggering 44% of British adults now suffer from at least one allergy and the number of sufferers is on the rise, growing by around 2 million between 2008 and 2009 alone. Almost half (48%) of sufferers have more than one allergy.
Meanwhile, Mintel reported that the market for over the counter allergy remedies has seen little value growth since 2004, increasing by 5% between 2004 and 2009 to reach £110 million. Value sales have now stagnated as price competition from supermarkets keeps prices low. More than seven in ten allergy sufferers use medication to treat allergies and instant relief products such as nasal sprays and eye drops are seeing the fastest growth. Hay fever remedies take the greatest share of the allergy remedies market, at an estimated 77% of value sales in 2009. Mintel forecasts the allergy remedies market to increase by 6%, rising to an estimated £117 million
by 2014.
