IRI report says private label struggling

By Jim Cornall

- Last updated on GMT

An IRI report on private label says the category is under pressure across Europe.
An IRI report on private label says the category is under pressure across Europe.

Related tags Private label Marketing

A new private label (PL) report, 'Private Label in Western Economies’, has been published by retail market analysts IRI.

The report reveals that PL is under pressure across Europe with value market share falling in 2015.

It analyzed private label sales trends and price and promotions in six European countries (France, Germany, Italy, Spain, the Netherlands and the UK) as well as in the US and Australia.

 It highlights a clear downward trend and the fact that retailers and manufacturers are struggling to cope with challenging market conditions, pressure from the discounter channel, and national brands pumping money into promotions.

Price wars and big brands

While the UK remains the strongest market for private label, the report says it has been a tough year both in the UK and in other markets due to ongoing price wars and national brands being more successful.

Tim Eales, director of strategic insight at IRI, spoke to DairyReporter about PL in the UK dairy industry.

Eales said the general trend at the moment is that own label is going down.

“In our study, what we've done for the UK is we've used the Kantar Worldpanel top line trend of private label as our headline figure, and that shows private label share going up by 0.4 share points, and that includes the bits that we don't cover, principally the discounters, Aldi and Lidl,”​ Eales said.

“They are very heavily own label in the manner that Kantar Worldpanel qualifies own label, and that is a product which only sells through one retailer.”

  • Private label is shrinking across Europe, something that is also impacting national brands, as FMCG retailers and manufacturers focus on cutting range and assortment.
  • Supermarkets are losing private label sales to the discounters, primarily from the economy end of their private label ranges.
  • The price gap is closing – private label prices are getting closer to national brands’ as private label trade promotion support is reduced.
  • The food sector remains a key area for private label, but all categories are declining or are stable in value shares.
  • France has the highest private label share decrease of the eight countries monitored in 2015 yet it has a high private label value share at 34.1%, compared to Italy’s 17.2% value share and Australia’s 13.9% value share.
  • The UK has the best result with an increase of 0.4 points, bringing its value share to 51.8% in 2015.
  • For French retailers and manufacturers operating in the private label space, 2015 was a difficult year. All categories struggled from 2010 to 2015, whilst national brands grew by 12.8% in value, private label only saw a value increase of 1.5%. Private label growth needs to be encouraged across the country to compete with the promotion pressure coming from national brands.
  • The outlook for private label is more positive in Italy for the premium tiers with growth in 2015 despite it being a tough year. There has been investment in premium price private label assortment (by product and by category) to provide shoppers with options to trade up. At general level in Italy private label lost share, especially in the economy offer.
  • In Spain national brands were more successful in 2015 than private label. This is partly due to the consumer’s mindset, as many Spanish shoppers perceive national brands to be higher quality products and will purchase branded items even if it means that they spend a bit more.

Premium end of PL shows growth

He said that Kantar shows the headline trend, whereas IRI shows the sales just through the outlets on the IRI service, which does not include Aldi, Lidl and Marks&Spencers.

“So what we believe is happening is that Kantar tell us that the economy range of own label is dropping quite fast at the moment in terms of sales, and that the premium end of own label is where any kind of growth is coming for own label. But overall, the economy range seems to be losing in traditional supermarkets to the discounters.”

Eales said that he is seeing a reduction in the value share of own label across Europe.

“Wherever we have the information, it's telling us the same thing, about economy ranges shrinking in size, and premium sales within the own label range growing in value.”

No change imminent

And he said that there probably won’t be a change in the near future.

“The level of trade promotion support in the UK is still reducing, on both brands and own labels, but the own label level is a good deal less anyway.

“And with less products in the range, and a lot of activity by the brands on trade promotions these days, because they are all chasing sales, and then we've got all the price wars, which the brands are very much involved in, then it doesn't really seem to me there's going to be a great deal of change.”

Perception of quality

Eales said that he asked a French colleague about the situation in France.

He was told that his impression was that, "he was not convinced private label would grow again even if the price wars stopped.

“He thinks that there is an issue among consumers that their perception of private label quality is not good enough, and that retailers in France might have to think of a way of improving that before the trend starts to change,”​ Eales said.

Influence of internet game

The one anomaly in the table is the apparent rise in private label squirtable cream, which may have more to do with an internet craze than culinary use.

“I could see that the squirty cream was quite a bit different from the rest,”​ Eales said.

He pointed to the figures possibly being down to a game, Pie Face, where cream is squirted onto a hand-shaped flipper, before being deposited firmly in a victim’s face.

“It was all over the internet, so I would imagine if you're going to put squirty cream in your face, you'd use the least expensive variant you could find,”​ Eales said.