In a recent interview with the trade magazine European Supermarket Magazine (ESM), Bryan Roberts, retail insights director at Kantar Retail, discussed the huge potential for Private Brand and the retailers’ ability to grow their brands. Consumers may have originally chosen Private Brand because of its competitive prices, but the downturn has created incredible potential for the retailer owned brand sector. Here are some of his insights on the Private Brand phenomenon.
On key market conditions:
There are some longstanding conditions that combine to create a market that is favorable to higher Private Brand penetration, namely high concentration, a strong presence of hard discounters, international involvement, surplus capacity in manufacturing and/or the advent of specialist private labelers, shopper demand, and retail strategy. An economic downturn always helps, too!
On the shift from national brands to Private Brand:
Unlike in 2008/2009, when we saw a boom in economy private label sales as shoppers traded down from both brands and standard private brand, the switching in 2011 has been from brands to standard private label ranges, suggesting that value is as much about quality as it is about price in the current environment.
On retailers adapting to demand:
We are still seeing most European retailers adopting the ‘good, better, best’ approach of economy, standard and premium, but there are an increasing number of retailers that are aggressively driving development in niches such as kids, organic, healthy eating and Fairtrade.
In 2011, I visited stores in Switzerland, France, Germany, the UK, Belgium, Bulgaria, Romania, the Czech Republic, Portugal, Spain and South Africa, and in every single market I witnessed innovative and impressive private label development and strategy… private label innovation is the name of the game.
On key players in European market:
The leaders at the moment are possibly the leading three UK grocers, and I’ve always got a lot of time for what Mercadona is doing. Casino, Ahold and Delhaize continue to impress, too.
On the components of private label pricing:
Because more of a private label item’s retail price is made up of raw materials and manufacturing costs, the ability of retailers to hold back inflation within their private label ranges is more limited than that of branded manufacturers.
On pricing matching:
Price matching and price comparison, such as that used by Sainsbury’s, Asda and Leclerc, often means that price – if indeed it ever was – is no longer a key differentiator. Retailers that offer the lowest prices are not necessarily going to win. Quality is an important part of the value-for-money equation, and private label is a key driver of quality perception.
On the future of secondary-purchase brands:
The likelihood of any brands outside of the top two or three surviving many categories is bleak. That said, as we have seen in the US, alternative channels such as fixed price-point chains, hard discount and online can offer opportunities for those brands that have been sidelined by major supermarkets.
On Private Brand in 2012:
There is no doubt that retailer brand remains a key strategic imperative for all retailers and, as such, will continue to remain at the forefront of activity in 2012. More cautious consumers equal more value-conscious shoppers.
Bryan Roberts is Retail Insights Director for Kantar Retail EMEA, based in London. Prior to joining Kantar Retail, Bryan was the Global Research Director at an international retail intelligence provider. Bryan has around 15 years of experience in the retail research and insights industry and has specialised in themes such as private label strategy, store concept development, Walmart, and discount retailing, working for clients including some of the world’s largest retailers and suppliers. Bryan is a frequent commentator on retail issues for the global media and a sought after speaker at trade events.
Bryan holds a Masters degree in International Political Economy from the University of Warwick, and has been a Visiting Fellow at the University of Surrey’s School of Management since 2009.