Private labels : PL marking time… before bouncing back?
According to Michaël Watine, Client Business Partner at Nielsen, Private Labels are far from having said their last word, even though they are going through a period of stagnation in France. An expert’s analysis...
La rédaction vous conseille
The word “saturation” is used with growing frequency in connection with Private Labels (PL) in the food sector (FMCG + Self-Service Fresh Products), with a threshold of 30% market share in value terms which has resisted them for 3 years in France. Over and above the Drive phenomenon which sustains their growth, one conclusion is undeniable with regard to supermarkets and hypermarkets: PL are losing ground by -0.2% in value terms, compared with +2% for Manufacturer Brands (MB). Have French shoppers really entered a phase of disaffection This stagnation of PL is peculiarly French, since in other places they are progressing faster than the average, even in the UK, reputed to be the champion in PL. Indeed, the essence of the explanation lies in the present context of French retailing, which is highly competitive. Retailers have never placed so much emphasis on Manufacturer Brands to attract shoppers. Competition between supermarket groups has intensified over the past two years, generating a downward trend in the prices of Manufacturer Brands and thus a diminishing price difference with respect to PL: this margin has moved from -32% to -30% over that period. Even in certain store chains, the difference has fallen by as much as 8 points.This attractiveness of MB prices is intensively emphasised in their media communications and promotions. Two or three years ago, however, communication by store chains was still frequently focussed on PL and their attractive quality/price ratio. Nowadays, PL are significantly less present on our screens. We are now very often exposed to “store” advertising copy in which the message is centred solely on the brands, with a final screen showing a national brand together with a price label. In parallel with the prices of non-promoted items, the promotional weight of PL is falling, whereas it continues to rise slightly for Manufacturer Brands, reaching 23.5% in 2013. Even more impressive than the promotional presence is the level of discount now offered to shoppers, which now averages 32% of reduction for a Need Unit i.e. slightly more than the non-promoted price difference between PL and MB!
In addition, 2013 was the first year for a very long time in which the range of PL progressed more slowly than Manufacturer Brands (+2.3% v. +3.2%). For many retailer chains, MB owe their dynamism to a significant offer effect. There is no longer any point in demonstrating the strong reactivity of brands to the size of their range! And, as well as being penalised by the modest growth of their offer, PL suffer the increased visibility of brands in terms of retail shelf space.
In the final analysis, only modest and younger households, with limited purchasing power, continue to increase the proportion of PL in their shopping lists. The challenge now facing PL is to win over consumers in a larger number of categories!
The most immediate route towards reinvigorating PL is product differentiation, implying innovation, new packaging and penetration of premium segments. Improving quality as perceived by the consumer is a permanent, vital challenge for PL, because buying such a product implies first of all a search for an attractive quality/price ratio. In this context it no longer seems appropriate for PL to seek to restore their price attractiveness by reducing product quality: using inferior raw materials means taking a real risk.
“Don’t consume more, consume better” is a real trend in the food sector in France. Over the past two years, volumes have been relatively stable, but numerous markets are making the most of the situation by moving up-market. In the medium and long term, whether or not PL make a comeback in strength, will be determined by the strategies of retail chains. This is demonstrated by the fact that PL are still strong in those retail chains which continue to support them. It would therefore be wrong to believe that the growth of PL in France is finished, because a turn-around in the context of French retailing could bring them back into the limelight at any time. Retail chains must, however, enter a new era in their communication (traceability, civic and local responsibility, etc.). An example to illustrate this need can be seen in the “horsegate” affair of early 2013, concerning frozen cooked dishes, which had a greater effect on PL than on Manufacturer Brands, although this food scandal was not directly associated with PL by the media coverage! More work is required to reassure the consumer.
How can PL differentiate themselves
- R&D innovation is no longer the private domain of Manufacturer Brands, but of retailers too.
- Product renewal. The classic PL accounts for 84% of PL sales. The renewal efforts of the retailer chains can make the difference.
- Reinforcement of the local and the organic . Premium” PL are particularly fond of this battlefield.
LSA at PLMA Trade Show
This issue of LSA will be widely distributed at the PLMA, the Private Label Trade Show which will take place in Amsterdam on 20-21 May 2014. The Private Label Manufacturers Association will count more than 2,200 exhibitors, representing manufacturers of food and non-food products from 70 countries. More than 10,000 buyers and supermarket managers are expected.
A lire aussi
La bataille du goûter %%HORSTEXTE:3%%%%HORSTEXTE:2%%Environ 3,7 milliards d'euros : c'est ce que représenterait le marché du […]
La beauté en plein doute sur le drive On promet de passer les 3 000 avant la fin de l'année. Tout calcul fait, cela représente […]
Le transport poussé à se réinventer Le portique blanc bardé de caméras trône depuis quelques jours au-dessus de l'autoroute […]
Imposer la lumière naturelle et les tech nologies led C'est un petit glissement sémantique qui en dit long. Chez Unibail- Rodamco, on ne […]
Produits de la mer : Sortir des eaux troubles A vis de tempête sur les rayons des produits de la mer ! Les poids lourds des rayons, comme le […]
Marques de distributeurs : Des MDD à l’arrêt... avant un rebond ? shopper: 32% d’économie en moyenne sur une unité de besoin […]