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Private-label brands are continuing to come under increasing pressure across Europe, according to a report from IRI published today, which analyses private-label sales trends and price and promotions in eight countries worldwide.
The report, Private Label in Western Economies, looked at the fortunes of private-label foods in France, Germany, Italy, Spain, the Netherlands, the UK, the US and Australia.
Private-label in Europe fell as a share of the total FMCG market by 0.6% to reach 38.3% in 2015. IRI claimed that this highlighted both a downward trend and the fact that retailers and manufacturers are struggling to cope with challenging market conditions, including pressure from a growing discounter channel, as well as national brands investing large amounts of money in promotions. Private-label market share measured by pack sales also dropped by 0.5% to 47.4% last year, the research company added.
While there are encouraging signs of economic growth in Europe, with GDP up 1.7% for 2015 and unemployment slowing or stabilising, there were signs that shoppers’ decisions about whether to buy private-label over recognised brands varied from country to country.
France, for example, saw the highest private-label share decrease of all the eight countries in 2015 but still recorded a robust private-label value share of 34.1%, compared to Italy’s 17.2% and Australia’s 13.9%.
The UK remains the country with the strongest penetration of private-label with a value share of 51.8% in 2015, increasing by 0.4% on the previous year, as measured by Kantar Worldpanel UK. This included the discounter channel, where retailers such as Aldi and Lidl have enjoyed surges in popularity, and other private-label food retailers such as Marks and Spencer.
The IRI report also points to the fact that supermarkets are losing private label sales to the discounters, primarily from the economy end of their private-label portfolios.
“The report presents an interesting picture, despite a decrease in private label value and unit market share overall,” said Tim Eales, director of strategic insight for IRI. “Economy ranges are facing big challenges – not least from the discounters, but also in the minds of shoppers who tend to equate ‘economy’ with ‘low quality’ – but it seems that premium private-label is actually growing. This is where retailers should be focusing their attention in order to win shoppers hearts’ and minds when it comes to private-label.”
The IRI report has also highlighted that private-label assortment is shrinking across Europe – a trend that is also impacting national brands, as FMCG retailers and manufacturers focus on cutting their range and assortment for higher performing categories, brands and points-of-sale.
Eales added: “We’ve seen this overabundance of products on the shelves across many of the countries – there is simply too much choice for the average consumer today and private label is often the victim of cuts to products that appear on store shelves. Retailers and manufacturers need to put in place the right strategies to help them focus on what shoppers want, but also to understand the impact of their decisions when it comes to reducing assortment and range.”
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