Private Label

Quo vadis, private label?

Tuesday, 30 April, 2019 Food From Poland 35/2019
In recent years, the global market has been recording an intense growth in shares of private labels in the entire FMCG sales. Private label is a concept that has been present in trade since the late 19th century. The economic factor has been underlying for the attractiveness of private labels, yet today consumers no longer associate them merely with cheap counterparts to branded products.
The Nielsen report published last April, based on research conducted in 60 countries, shows that the share of private labels in total sales of fast-moving goods on the global scale reached 16.7% in 2016, which means growth by 0.4% compared with the previous year. Some European countries may boast a share of private labels in the FMCG sales on a level exceeding 40%, such as the UK. The highest private label share growths were recorded for Austria and Germany. What makes the European market a place where private labels develop so dynamically? As the main causative factor of growth, experts point out the development of retail trade and changes in consumer behaviour.

Private label yesterday and today

In the 1980s, private labels were first marked with trade chain logos. The next decade, in turn, brought private label category diversification by price: economy (low price shelf), standard (medium price shelf), premium (high price shelf). Currently, the diversification of categories is based on a combination of the price criterion and the customer benefit.

Brand revolutions

A revolution in the assortment of private labels is going on currently, almost before our very eyes. Private labels slowly cease to be perceived by consumers as merely cheap counterparts to branded products. It is safe to say that private labels challenge traditional brands, not just by price but by innovativeness for which the changing needs of consumers are the driving force.
Private labels have become an alternative to branded products.

Private labels are developing in line with various trends, connected, among other things, with a healthy lifestyle, safety or convenience. Therefore, trade chains issue all kinds of private label products: organic, natural, ecologic, healthy, gluten-free, sugar-free, lactose-free, preservative-free, GMO-free, paraben-free, with a short expiry date, express-preparation, convenient in use, etc. In the age of globalization, products of national and regional cuisines enjoy enormous popularity.

Private label – an ace up the trade chains’ sleeve

A private label, based on a traditional concept of a good quality-to-price ratio, currently has a range of properties, important from a consumer’s viewpoint, enabling it to become the highlight of a trade chain’s offer. It is often a product so unique and one-of-a-kind that the chain uses it as a tool to build customer loyalty. Private labels are increasingly gaining the status of a rightful competitor to branded products, with their innovativeness and quick time of response to trends and consumer needs. Moreover, a private label may set new market trends. Usually of domestic origin.

What do consumers make of private labels?

Many analyses, performed both on the global market and on local ones, show how private labels are perceived today from a consumer’s viewpoint. The Nielsen report shows that 58% of the world’s population consider themselves so-called smart shoppers when buying private label products. 67% of the surveyed attribute the value of private labels to their very favourable quality-to-price ratio. 70% of consumers purchase private label products in order to save money. 65% perceive a private label as a good alternative to a branded product. 71% of the population notice that the quality of private labels has significantly improved over time. A report published by the Daymon agency in April 2018, presenting data from the US market, shows that 81% of consumers purchase private label products during each visit to a store; 85% of consumers trust private label products on par with branded ones; 59% of US respondents appreciate the high diversity of private label products; 53% go to a shop specifically to buy a private label product. How does the situation look like in Poland? In the light of a market report on private labels, commissioned by the On Board Group in 2014, as many as 97% of the surveyed have declared they have or used to have private label products at home. 73% of Poles have positive associations concerning them. Among the advantages, the consumers point out: attractive price (83%), promotions (76%) and a good quality-to-price ratio (64%). As many as 54% of the surveyed claim a private label suits their needs. For comparison, only 57% of respondents declare that products of well-known brands fit their needs.

What will be the future of private labels?

Analysts predict that the significance of private labels will still be on the rise. Trade chains will utilize private labels to compete efficiently with global brands. A significant factor from the viewpoint of the development of private labels are the generational changes on the consumer market. The so-called millennials will be eager to test new products, including private labels.

Renata Juszkiewicz
The President Of The Polish Organization Of Trade And Distribution (POHiD)

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