ireland private label report · 2019-05-29 · their private label is essentially a...

I R E L A N D P R I VAT E L A B E L R E P O R TFEBRUARY 2013

2 IRELAND PRIVATE LABEL REPORT

PRIVATE LABEL FROM PAST TO PRESENT…The Irish FMCG market has experienced a rollercoaster of change over

the last 10 years. Convenience, indulgence, health and wellbeing were

key growth drivers in the past but now as the economic situation puts

pressure on consumers’ pockets, a focus on value, price, promotions

and private label are becoming more prevalent in consumers’ minds

and this is borne out in their ‘new’ shopping behaviours.

Traditionally buying private label was about paying a lower price for a

limited range of essential grocery items and for this lower investment

you accepted a trade off in quality and packaging. This is no longer

the case. Consumer acceptance of private label has grown and

continues to grow as comparable, and in some cases higher quality

product ranges become available, and private label lead the way with

innovation in certain categories to better serve consumer’s needs.

As our latest Nielsen Consumer Confidence Survey Q4 2012 shows,

the index in Ireland dropped -2 points last quarter and remains low

at 65¹. Consumers are turning to private label as a belt tightening

strategy and are finding that it is not necessarily the step down or

trade off they were expecting. Retailers traditionally used own branded

sku’s as a point of differentiation to competitors. However, now

given its growth, retailers are investing in own label themselves as

a ‘brand’ and are using tiered private label to address profitability.

Manufacturers find themselves in a position where some of their key

competitors are owned by the people that they need to make their

business possible. The old notions of private label being for private

label buyers, low income or larger households, are no longer true.

Private label items now make their way into a high percentage of

shopping trolleys across various categories and have become relevant

for all types of households from all demographics and for all shopping

trip types. The question now is how to find a three-way win for retailer,

manufacturer and consumer.

THE SHIFT INTO PRIVATE LABEL IN PARTICULAR, IS A TREND THAT WOULD NOT HAVE BEEN PREDICTED OF THE LOYAL IRISH BRAND BUYERS BUT HAS BECOME A STARTLING REALITY THAT IMPACTS MANUFACTURERS, RETAILERS AND CONSUMERS IN DIFFERENT WAYS.

Elaine Wade,

Business Unit Director,

Nielsen Ireland

3Copyright © 2013 The Nielsen Company

PRIVATE LABEL IN NUMBERS …The most recent Nielsen retail data shows private label value sales

in the latest 52 weeks valued at €2.3bn and growing by 7.8%². This

represents a 22% share of the total available Nielsen basket sales.

Over the same period branded goods account for €8.2bn, however,

sales are declining -1% versus the same period a year ago. German

discounter stores Aldi and Lidl are contributing to the overall strength

of private label with the majority of their grocery sales going through

private label items. These discounter stores continue to grow from

strength to strength in Ireland. Now accounting for 14% share, and

growing by 15% year on year, as they continue with aggressive store

openings to further increase their reach of the population, and

continued strong above-the-line support.

As illustrated in Chart 1 below private label share remains highest in

the chilled/frozen, canned, grocery and household categories where

it is more challenging for brands to differentiate themselves from

store owned brands. However, private label share in alcohol, baby and

health & beauty remain the weakest, and interestingly it is in these

categories we see highest investment in brand equity and some of the

strongest levels of emotional involvement in product purchase.

It is important to note that the private label phenomenon has

not been restricted to the Multiple retailers either. As increasing

unemployment, increasing fuel prices and the end of ‘breakfast

roll’ era caused significant decline for the convenience sector, these

retailers are now actively offering consumers own branded ranges to

help drive footfall back into store and offer value in key categories

to shoppers. While the private label shares in the convenience trade

(Chart 1) are much lower than their multiple equivalents, share is

increasing in all categories.

+7.8% 22%GROWTH YOY

SHARE OF TOTAL AVAILABLE NIELSEN BASKET SALES

PRIVATE LABEL IS WORTH €2.3BN


CHART 1 - PRIVATE LABEL VALUE SHARE OF KEY CATEGORY BASKETSMAT TO 30th DECEMBER 2012

Source: Nielsen Total Coverage - Strategic Planner MAT 30th Dec 2012

Value Share of Total Coverage Value Share of Convenience

8.9 2

22

25.7

35.8

5.9

5.2

41.1 10.8

51.7 15.3

18.4 4.1

14.1

3

18.8

15.1

12.8

PRIVATE LABEL

BAKERY

CANNED FOOD

CHILLED/FROZEN

CONFECTIONERY

HEALTH & BEAUTY

HOUSEHOLD

4.8 0.4

36.6 19.4

GROCERY

LONG ALCHOHOL

SPIRITS

WINE


SO HOW HAVE THEY ACHIEVED THIS SUCCESS…One of the key benefits that retailers have over manufacturer brands is that

their private label is essentially a ‘superbrand’. These brands do not just

compete in one FMCG category but across almost every product category

available in store. While some major brands do cross several categories,

there are virtually none that cover the breadth that private label ranges do.

In more recent times, as consumers trust of private label has grown, we

have seen their brands drive growth outside of FMCG with a much broader

range of products and services such as telecommunications, financial

services, clothing, insurance and household goods. In reality these really

cannot be considered a ‘label’ any longer but a private or store owned

‘brand’ and understanding this is the key to understanding their success.

Retailers have started to really use all of the traditional brand growth

levers to expand the breadth and success of private label - price, ranging,

innovation, sustainability, market research, merchandising, marketing

activity and cost management to name but a few. This is how they are

growing.

With an average grocery price differential of approximately 33%⁴, store

brands traditionally used price and only price, as the key driver for

customer recruitment. However, recent years have seen their strategy

move away from this to a more sophisticated range of products with tiers

that respond to their customer needs e.g. quality, value, organic, fair trade,

on the go, free from or kids. While competitive pricing still remains a key

weapon in their arsenal, they now have a wider scope to differentiate.

In some cases store brands can actually be one of the more expensive

offerings for the more affluent consumer, for example; ‘Tesco Finest’,

Dunnes ‘Simply Better’ and Marks & Spencer’s ‘Simply’. They invest

heavily in research so that they can understand their consumers

and identify the key footfall and purchase drivers in-store. They also

continuously track performance to ensure they are on top of their game

and ahead of the competition.

The sheer size of retailers allows them the flexibility to offer tailored

solutions for different store formats and different purchase occasions.

They are also very quick to identify consumer needs and offer unique

solutions such as M&S ‘Dine in for 2’ at a special price, or SuperValu’s

‘Prepared by the Butcher’.

The reality is that store brands actually mirror the retailer that owns it and

is synonymous with their corporate offering – it has become very closely

linked with banner equity. Consumers trust that the retailers are doing the

best for them and this transfers into a trust of their store brand offerings.


STRONG COMMUNICATION OF OWN BRAND OFFERINGSRetailers are also continuing to invest heavily in TV advertising to

get their message to the consumer. All five multiple channels are in

the top 20 advertising spenders ⁵. Similar to their in-store strategy,

traditional store brand advertising used price as the hook and

engaged with consumers from a rational point of view. However,

recently they have chosen to focus on other touch points such as

humour, Irishness, premium/luxury offerings or occasions. This is

helping them build that emotional appeal that brands have built over

the years.

Take for example SuperValu’s strong communication around their

new store brand range in 2012 where they focused on being strong

advocates of local business, Irish jobs, reassuring the customer

that all products are quality assured and independently taste tested

against leading brands. In a time when our economy and consumer

spend is under so much pressure and unemployment rates are high,

this has allowed SuperValu to engage with consumers on another

level.


Source: Nielsen AdDynamix 2013

Aldi’s ‘Like brands, only cheaper’ campaign also reassured consumers

about the quality of their ranges by using humour and the retailer

also cleverly focused on the ‘Irish’ aspect in their ‘Love Ireland, Like

Aldi’ campaign, highlighting strong Irish sourcing credentials and

partnerships with local farmers.


The extensive range, product development and improvement in

quality and packaging for store brand ranges over the years has

led to an erosion of the traditional negative stigma of private label.

Nielsen’s latest New Products Sentiment Survey⁷ reveals that 67% of

respondents said they would buy a new product store brand or value

option when available, indicating openness to buying Private Label.

(Chart 2)

Nielsen Online Survey Q3 2012 – New Product Purchase Intentions Sentiment Survey

PPERCENT IRELAND RESPONDENTS THAT DEFINITELY/SOMEWHAT AGREE TO THE GENERAL PURCHASE OF NEW PRODUCTS

67% 63% 60%

I WILL PURCHASE A STORE BRAND OR VALUE OPTION WHEN AVAILABLE

I AM GENERALLY WILLING TO SWITCH TO A NEW BRAND

I PREFER TO BUY NEW PRODUCTS FROM BRANDS FAMILIAR TO ME

23%

I AM AN EARLY PURCHASER OF NEW PRODUCT INNOVATION

47% 40% 28%

ECONOMIC CONDITIONS AND RECENT WORLD EVENTS MAKE ME LESS LIKELY TO TRY NEW PRODUCTS

I PREFER TO PURCHASE LOCAL BRANDS OVER LARGE GLOBAL BRANDS

I AM WILLING TO PAY A PREMIUM PRICE FOR INNOVATIVE NEW PRODUCTS

58% 56% 54% I LIKE WHEN MANUFACTURERS OFFER NEW PRODUCT OPTIONS

I WAIT UNTIL A NEW INNOVATION HAS PROVEN ITSELF BEFORE PURCHASING

I LIKE TO TELL OTHERS ABOUT NEW PRODUCTS I HAVE PURCHASED


LESS EXPENSIVE THAN NAMED BRANDS - 64%

THEY OFFER REALLY GOOD VALUE FOR MONEY - 41%

QUALITY JUST AS GOOD AS NAMED BRANDS - 40%

QUALITY OF STORE BRANDS IS IMPROVING - 31%

WORD OF MOUTH. OTHERS HAVE RECOMMENDED THEM - 12%

PRODUCTS I WANT ARE ONLY AVAILABLE IN STORE BRANDS - 5%

ALL OTHER - 1%

NONE - 3%

DON'T KNOW/NOT SURE - 2%

It cannot be denied that recent economic trends and pressure

on consumer pockets has helped the more recent surge towards

store brand growth. Price remains high on consumers ‘reason for

purchase’ list , however they are becoming increasingly accepting

that the quality is just as good as named brands and that they are

really good value for money (Chart 3). Price is one of the key triggers

for purchase, however, if the quality is not there, consumers will

not return, and retailers are ensuring that quality is high on their

store brand agenda. Consumers see retailers as looking after their

needs in terms of reducing weekly shopping bills and offering them

value and this trust comes through the private label ranges in store.

Furthermore, they have indicated strongly that their intention is to buy

even more private label in the future.

REASON FOR BUYING STORE BRANDS

Source: Nielsen Shopper Trends 2013 (Base: All store brand buyers n=975)


SO CAN MAINSTREAM BRANDS REALLY COMPETE…Market analysis in the past suggests that there is no single response

strategy for manufacturers competing against store brands. Indeed,

what works for one brand/category may not work for another. There

has been somewhat of a surrendering or ‘laissez faire’ attitude to

store brands in certain categories in recent years, an attitude that ‘we

can’t possibly compete so leave them to it’. However, not competing

against store brands means lost opportunity, as you lose customers

without fighting for them. Manufacturers

need to actively compete against store

brands in the same way they would against

any other growing brand. It does not

have to mean more promotions, lower

margins and less bargaining power with

retailers. However, to compete effectively

and efficiently at all requires a detailed

knowledge of your brand and category. It is

key to understand your brand positioning,

who you are what and you stand for,

consumer decision tree flow, category

dynamics, competitive positioning and any

contextual global or local trends.

One option to competing with store brands is to actually manufacture

the store brand products yourself. Work in partnership with the

retailer to drive the category through both store brand and branded

offerings ensuring that consumer needs are met. Remember that

store brands are also a challenge for retailers as they need to manage

it profitably. Manufacturing store brands can offer you a way to drive

volumes resulting in economies of scale for your overall business.

Many manufacturing companies have gone down this road and

enjoyed lucrative partnerships with the retailers.

MANUFACTURING STORE

BRANDS CAN OFFER

YOU A WAY TO DRIVE

VOLUMES RESULTING IN

ECONOMIES OF SCALE

FOR YOUR OVERALL

BUSINESS.


For some, manufacturing store brands is not an option, or it does

not fit with the company strategy, so there are alternative ways to

compete. Aside from promotions, there is focus on strong brands

and their emotional appeal to consumers, innovation to break their

shopping habits, and fulfilling consumer needs. Some retailers know

their shoppers better than manufacturers with the bank of data they

collect through loyalty cards–make sure you are at the top of your

game to compete effectively. While price is still a store brand lever

do not resort to using price solely as a defence/competitive strategy.

Short term price down activity can improve short term performance,

however cumulated short term price downs become long term and

this can damage brand equity. In fact some recent pricing studies

have actually shown surprisingly low price relationship between store

brands and mainstream brands, so consumers may not be referencing

as much as you think. Manufacturer brands need to re-engage with

all core levers to drive brand loyalty. Increasing brand loyalty will help

safeguard your business for the future.

Building this loyalty however is the difficult part. Brand trust is

eroding over time and with market choice and category ranges ever-

increasing, it is becoming more and more difficult to cut through and

get your message across to the shopper. The time has come when the

shopper is in complete control and brands need to be ‘everywhere’.

Mass communication has made it increasingly difficult to cut through

to the consumers.

While some brands are using the strategy of targeting customers

only at point of purchase, using only this strategy alone can be a

risky strategy for certain other categories. For example it is key to

understand where the consumer ‘engages’ with your category. For

example brand choice in ketchup is influenced pre-store; whether

this be habitual choice, advertising, family preference or buzz, the

key for this category would be to focus activity in these areas or miss

the point of decision making. For a category like toilet tissue there

is much stronger in-store index so there is an opportunity for your

brand to activate consumers through in-store influences–promotions,

price, merchandising, packaging etc. Similarly if consumers shop your

category on auto pilot, you could be investing significant sums of

money on in-store activity, only for it to be ‘missed’ by consumers⁶.

In store battling for impact on shelf has become more and more

difficult as the shelves become more and more cluttered with

products. If consumers are not engaged with your brand then store

brands have a greater opportunity to win at the point of purchase

where functionality and price will win out.

Also, consider the growth of on-line shopping where the consumer

does not even get to the store. While on-line shopping in Ireland

is still very small it has advanced so much in the UK that Tesco are

opening ‘dark stores’ to supply the online shopping population–how

do you compete for ‘online shelf space’?


In addition it is also key to understand your price and promotional

elasticity and also elasticity relative to your competitors. This can

help you to decide on the best strategy forward to win. For brands

that are relatively price inelastic and in possession of more than

the fair-share of their category, the private label threat is more

easily countered by investing in marketing. For brands that are

relatively more price elastic, and whose volumes are sensitive to

promotional activity, promotional activity should be reviewed and

the most effective promotions should be used sparingly (Source:

Nielsen Analytic Consulting). It is clear therefore, that blending

a ‘bigger picture’ view of category dynamics from a country and

channel (such as hard discount development) perspective with a

more minute view of brands within a category, is the way forward.

Looking at the key drivers of some of the winning brands of 2012

the levers used included innovation to target different consumer

needs, focus on health, focus on value and different consumption

occasions serving a specific need such as big nights in,

pre-planned ‘impulse’ purchase and making lunch to take to work.

For almost all, they used the strength of long term umbrella brand

advertising emphasizing quality and appeal of the brand, and the

brand message was conveyed in a simple, convincing manner

with a functional benefit that solved a consumer need. In addition

most had quite distinctive packaging. Almost all were something

‘different’ which were used to disrupt consumers usual shopping

behaviour and to encourage trial. (e.g. Millicano, Cully & Sully,

Persil Concentrate, Oral B).

In addition it will become more important for brands to be more

socially responsible. This strategy may not necessarily be a big

driver of sales peaks but it is about ‘doing what is right’ from the

point of view of the health and future of the population and the

planet. One trend that will remain at the forefront of consumers

mind is health. Obesity levels continue to rise to shocking levels

particularly in children and the subsequent health problems

that this will bring means that there is a responsibility on the

food manufacturers to work on addressing this by reducing salt

content, saturated fat content and portion sizes for example.

There has already been a lot of work done in this area and it will

continue to be a focus and an opportunity going into the future.

Additionally the area of fair trade, carbon footprint and reducing

packaging have also become very important–saving our planet

for the future generations offers brands another opportunity to

engage with consumers from an emotional and responsibility

point of view. Many key brands are already on this journey such

as Lyons tea, Cadbury, Nestlé and Mars chocolate, Nescafé and

Pampers but to name a few. This can be a costly strategy but pays

out in the long term.


SO WHAT DOES THE FUTURE HOLD FOR PRIVATE LABEL …There is no question that private label will continue to grow in the

future and any worries about the economy will only strengthen this

further. Chart 4 illustrates how consumers say that they plan to buy

even more store branded items in certain categories where they have

already bought into the range.

Looking at the UK, which is arguably one of the most advanced

private label markets in the world at 35% share, it highlights the

potential size private label could achieve with full support and time.

Consumer behaviours have changed irreversibly and they are setting

the agenda. Retailers will continue to drive premium store brand

ranges as this is the area where they can achieve real margins. Brands

need to ensure that they keep relevant, and more importantly, drive

customer loyalty to ensure the repeat purchase, otherwise their future

is at risk. Consumers expect better prices as standard so the winners

will engage with them on other levels. The occasional store brand

purchaser of today could be the regular purchaser of tomorrow if this

pattern is not disrupted.


Source: Nielsen Shopper Trends 2013 (Base: All store brand buyers n=975)

60% 38% 40%

66%

54%

44%

62% 56%

57% 59% 63%

69% 67%

40%

25% 42%

29%

34% 49%

31% 31%

37% 32% 33%

35%

28% 26% 29%

38%

18% 6%

12% 8% 7% 12%

6% 9% 4% 5%

3% 5% 4%

OTHERS BABY FOOD ALCOHOLIC BEVERAGES

STORE BRANDED MEDICATIONS

PREPARED MEALS NON-ALCOHOLIC BEVERAGES

PET FOOD CARBONATED SOFT DRINKS

SNACKS &CONFECTIONARY

PERSONAL CARE CANNED & PACKAGE GROCERIES

FROZEN & CHILLED FOODS

STAPLE FOODS DAIRY PRODUCTS HOUSEHOLD PRODUCTS, LIKE CLEANERS

PAPER PRODUCTS

62%

35%

3%

68%

59%

INTENTION TO PURCHASE STORE BRANDS BOUGHT IN PREV. 12 MTH

Buying more PL products than 12 month ago

Buying less PL prducts than 12 month ago

Buying about the same number of PL products

ABOUT NIELSEN

Nielsen Holdings N.V. (NYSE: NLSN) is a global information and

measurement company with leading market positions in marketing

and consumer information, television and other media measurement,

online intelligence, mobile measurement, trade shows and related

properties. Nielsen has a presence in approximately 100 countries,

with headquarters in New York, USA and Diemen, the Netherlands.

For more information, visit www.nielsen.com.

Copyright © 2013 The Nielsen Company. All rights reserved. Nielsen

and the Nielsen logo are trademarks or registered trademarks of

CZT/ACN Trademarks, L.L.C. Other product and service names are

trademarks or registered trademarks of their respective companies.

13/6085

Article by Elaine Wade,

Business Unit Director,

Nielsen Ireland

Any queries on above article,

please contact [email protected]

Sources:

¹ Nielsen Global Consumer Confidence Survey Q4 2012

² Nielsen Strategic Planner Dec 2012, Total Available Coverage

³ Nielsen ShopperTrends 2013

⁴ Nielsen Scantrack to December 2012

⁵ Nielsen Media AdDynamix data 2013

⁶ Nielsen Shopper Modality Ireland, 2010

ireland private label report · 2019-05-29 · their private label is essentially a...

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