ACNielsen, a VNU business, the world's leading marketing information company, today announced the results of its global study ‘The Power of Private Label 2005’ that spread across 14 product areas containing 80 categories in 38 markets across the globe.
The study revealed that Private Label goods comprise 17% of total value sales for the 12 months ending in March 2005, up from the 15% level found in a similar ACNielsen report published in 2003. In the Middle East, private label value sales are estimated at 3-4% and expected to increase 15 %.
In terms of growth, Private Label more than doubled the growth rate of manufacturer brands by 5%. In fact, in more than two-thirds of the markets studied, private label value sales grew faster than manufacturer brand counterparts.
Commenting on the private label growth in the Middle East, Hubert Lobo, Head of Retailer Services, said: “Private Label share to the overall super/hypermarket grocery sales in the GCC is 3 - 4%. However, growth is expected to surpass the global average at 15%. The success or failure of the Private Label business will depend entirely upon the footprint of the retail chain in a particular region. The larger the chain, the more likely is its private label going to be accepted. Price differentiation is also a major incentive to purchase private label. But one thing is certain; private labels will give global brands a run for their money in the next two years”.
Refrigerated Foods Takes the Lead
In the 2005 study, Refrigerated Food containing such categories as Milk, Cheese and Complete Ready Meals has grown by 9% versus the 2% growth that paper, plastic and wraps saw in the 2003 study.
Table 1: Private Label Shares and Growth Rates by Product Area (Based on Value Sales)
Product Area
Private Label Share
Private Label Growth
1
Refrigerated Food
32%
9%
2
Paper, Plastic & Wraps (PPW)
31%
2%
3
Frozen Food
25%
3%
4
Pet Food
21%
11%
5
Shelf-Stable Food
19%
5%
6
Diapers & Feminine Hygiene
14%
-1%
7
Health Care
14%
3%
8
Non-Alcoholic Beverages
12%
3%
9
Home Care
10%
2%
10
Snacks & Confectionery
9%
8%
11
Personal Care
5%
3%
12
Cosmetics
2%
23%
13
Baby Food
2%
13%
The rise of Refrigerated Food confirms a steady trend in the Private Label strategy of retailers worldwide: pushing Private Label products into premium segments that go beyond the “low price-high volume” commodity-driven practices of the past. In fact when ACNielsen compared the average price differential between branded and Private Label products within the 14 product areas, Refrigerated Food had the smallest price differential at 16%, compared to a global average of 31% across all categories.
The previously mentioned category of Refrigerated Complete Ready Meals (found within Refrigerated Foods), where retailers provide consumers with all the ingredients for a complete meal in a variety of packaging, styles and recipes, now commands 49% of overall category value sales. This nearly equal share with branded products in a category that emphasizes quality, freshness and often “healthy choice” clearly demonstrates how retailers can use Private Label to build loyalty and store equity.
“Strategically, retailers worldwide seem to be placing more and more of an emphasis on branding and marketing their Private Label wares to match the lifestyles and values of their shoppers,” noted Jane Perrin, Managing Director, ACNielsen Global Services and sponsor of the ACNielsen Executive News Reports. “From the Tesco Healthy Living range of products to Loblaw’s President’s Choice expansion into organics and health-oriented lines, retailers are expanding their brands far beyond a singular focus on low price points. We are even seeing retailers leverage the equity of their Private Label brands outside of fast-moving consumer goods into areas such as personal finance, insurance and telecommunications.”
“In this region it is important to keep in mind that the consumer is constantly seeking greater value propositions. This will become even more salient given the increasing cost of living and will further give a boost to the growth of Private labels,” added Piyush Mathur, Managing Director GCC. “Also, the higher margins for the retailers would translate into a greater push in the form of visibility and merchandising by them. The key challenge for retailers would be to get the supply chain in place.”
