Private Label Food and Non-Alcoholic Drink Trends: Post-Downturn Implications and Opportunities

Introduction Private label has witnessed continued growth, with own brands displacing national brands both in stores and in consumers' consideration set. Wider availability and growing sophistication has led to growing acceptance and trust. The economic downturn has reinforced private labels as a credible, yet cheaper alternative to branded goods, driving awareness and trial across demographic groups. Features and benefits * Utilize product, consumer and market insight intelligence to better evaluate the important strategic considerations that private label growth brings* Understand the scale and growth of the private label food and non-alcoholic beverage opportunity by sector and country, split by category level* Access insightful proprietary consumer opinion data highlighting the prevailing attitude towards private label food and drinks versus national brands* Identify and capitalize on the ten trends characterizing contemporary private label food and beverage product development and marketing* A dedicated focus on food and beverages for more specific and salient insight Highlights The economic downturn led to changes in shopping patterns that will remain in the long term—the adoption of private label being a pertinent example of this. In 18 of the 20 countries covered in Datamonitor's consumer research, more than 40% of respondents said that opting for private label to save money has become more important over 2008-10Own label market shares vary markedly by country/region. Developed markets in Europe and North America have maintained their position as the leading private brand markets, but growth is evident elsewhere as emerging market retailers grow big enough to achieve the economies of scale that helps facilitate private label developmentNearly half of consumers across 20 countries in Datamonitor's consumer research bought more private label in 2009-10. While some migration back to national brands will occur as economic circumstances improve, Datamonitor anticipates it will be less than the private label gain in many food and drink categories Your key questions answered * What are the key trends driving consumers' propensity to purchase private label food and beverage products? How do they vary by country?* What are the 10 NPD and marketing trends reflecting own brand development in consumer packaged goods?* What private label food and beverage product formats represent the biggest promise/threat to national brands?* What are consumers' perceptions of private label food and beverages compared to national brands? How do these perceptions influence where they shop?* What has been the impact of the economic recession on consumers' propensity to purchase private label products? How might this change going forward?

Table of contents

Executive Summary
In many countries and segments, private label is outperforming the category as market penetration follows an upward trajectory and more shoppers embrace store brands
Obtaining value for money, including through the consumption of private labels, is a deeply embedded priority for food and beverage shoppers
Consumers are forming more favorable perceptions of private label food and drinks, which reduces the perceived compromise associated with switching to own label
Favorable perceptions of private label food and drinks means that they can often be 'destination brands' driving grocery store choice and satisfaction
Private labels are being used in more sophisticated ways to aid retail branding
Actions for manufacturers
Actions for private labelers

OVERVIEW
Catalyst
Summary

THE FUTURE DECODED
INTRODUCTION: The growth of private label across sectors is one of the most pervasive trends influencing consumer packaged goods
Private label growth can be attributed to both ‘consumer pull’ and ‘manufacturer push’
TREND: In many countries and segments, private label is outperforming the category as market penetration follows an upward trajectory and more shoppers embrace store brands
Growing numbers of shoppers are turning to private labels and many intend to continue doing so
Private label is accounting for an increasing amount of grocery spend, including food and non-alcoholic drinks, across most countries
Private label food spending accounts for a disproportionately high percentage of the overall private label market in a given country
Penetration for private label non-alcoholic beverages is lower than food across most countries featured
Key take outs and implications: across countries, shoppers are continuing to make private label a common basket choice
INSIGHT: Obtaining value for money, including through the consumption of private labels, is a deeply embedded priority for food and beverage shoppers
The thrill and necessity of the 'bargain-hunt' continues to entice global food and beverage consumers
Private label is generally synonymous with saving money in consumers' minds
Buying private label/store brands to save money has become more important to more than half of consumers in 2008–2010
Consumers form their value for money judgments on factors beyond lower prices and product discounts
Key takeouts and implications: consumers continue to be highly selective in their purchase decisions, which has been a favorable pre-requisite for private label growth
INSIGHT: Consumers are forming more favorable perceptions of private label food and drinks, which reduces the perceived compromise associated with switching to own label
Consumer research routinely highlights improving perceptions of private label quality
With improving quality perceptions, private label food and beverage brands are generally recognized as being credible alternatives to name brands, but evidence of an 'attitude-behavior gap' exists
Brand loyalties are under continued threat, with few consumers in most countries attaching significant importance to brand image
Key takeouts and implications: private labels no longer suffer from a widespread stigma of inferior quality
INSIGHT: Favorable perceptions of private label food and drinks means that they can often be 'destination brands' driving grocery store choice and satisfaction
Private label range exerts high influence on store choice for nearly half of shoppers in many countries
Approaching two-thirds of shoppers are satisfied with the private label offering where they do most of their grocery shopping
The evidence is mixed as to whether store brands can garner store loyalty and to what extent the optimal mix is between private labels and national brands
Private label potentially appeals more to time pressured consumers who want to make quick and effective choices in-store
Key take outs and implications: some retailer own brands are becoming ‘destination’ products that closely match shoppers' preferences, boosting the reputation of product and retailer alike
INSIGHT: Ten trends characterize contemporary private label food and beverage product development and marketing
Tiered private label ranges are common across store formats and regions as retailers look to attract a broad range of consumer segments
Retailers are inflating the premium credentials of high-end own labels
Leading supermarkets are actively investing in discount lines to help counter the escalating threat posed by discounters such as Aldi
Private labelers are responding to consumer expectations by better involving them in the new product development process
Retailer brands are intensifying marketing efforts and, in doing so, embracing higher profile and more flamboyant marketing promotions
Retailers are aggressively delisting under-performing national brands (and replacing them with own label alternatives), and using their elevated bargaining power to impose price reductions
Having become compelling brands in their own right, some retailers are selling their owned brands outside of their own stores, including via online channels
Co-branding between private label and national brands is a likely outcome, so too is added retailer influence in the development of national brands
Retailers are reintroducing some national brand SKUs having realized there appears to be a optimal level of private label penetration
The extension of store brands into services and other areas aims to strengthen the brand equity of the retailer and drive shopper loyalty
Key take outs and implications: private labels are being used in more sophisticated ways to aid retail branding

ACTIONS
Actions for manufacturers
Determine whether to manufacture private label brands or not
Scrutinize and manage price gaps versus competing retailer brands
Create more exclusive versions of branded products to increase the (perceived) distance from private labels
Maintain national advertising spending to emphasize brand superiority and take the battle out-of-the-store
Highlight the risk of switching to a cheaper non-branded alternative
Consider selling differing brand formats through discounters
Entice and better reward consumers for their loyalty with more creative and engaging brand loyalty initiatives
Foster more collaborative relationships with retailers by leveraging synergies that benefit consumers
Consider developing value-driven flanker brands, but be sensitive to the impact it can have on broader brand perceptions
Be transparent because it can help build brand trust and equity
Effectively embrace social media to have dialogue with consumers
Actions for private labelers
Determine the most appropriate strategic approach taken to manage private label development and brand perception
Use the port-recessionary climate as an opportunity to further embed private label into consumers' lives
Reduce the perceived quality gap by offering something truly distinctive and/or standing for something
Invest in enhancing the image of the store brand itself, and, in doing so, emphasize a more personal touch
Make a private label brand synonymous with a particular category to elevate its' status in consumers' consideration set
Take steps to prevent private label cannibalization

APPENDIX
Definitions
Methodology
Further reading and references
Ask the analyst
Datamonitor consulting
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By sector: General alcohol, Trends, General drinks