A new global research report ‘Private label vs. Brands – an inseparable combination’ from the Netherlands based international financial services provider Rabobank Group Food and Agri Research division (FAR) shows that
- The global market share of private/own label food products is set to double from the current 25 percent to 50 percent in 2025
- A-brands will retain their importance for retailers to anchor categories’ price levels and give consumers choice and familiarity
- Good news for consumers is that they will still have access to familiar brands and have greater access to lower priced private label products
- Smaller secondary brands (B-brands) will have to strategically reposition to avoid being squeezed out of the market
- Two strategies are open to B-brands suppliers: either invest in quality and target the premium market, or specialise in private label.
- A consolidation spree among private label specialists is inevitable to achieve economies of scale and reduce the cost base
Rabobank’s conclusion that global private-label penetration will reach50 percent by 2025 is based on assumptions about food retail market structure. The report lists 11 drivers for private-label growth including
- Continued industry consolidation in developed food retail markets (western Europe, the US and Australia).
- Adoption of modern retail in developing markets (CEE, Russia and Turkey)
- Increased consumer acceptance of private label following the recession
- Further growth of the hard discount segment.
- Professionalisation of private label supply
Author of the report Sebastiaan Schreijen is Associate Director Processed Food & Retail at Rabobank. “Our research shows that private label and A-brands are an inseparable combination. Like love and marriage, you can’t have one without the other. But where two’s company, three’s a crowd. This report is an early warning to B-brand suppliers to adapt their strategies to survive.”