A new report covering the six largest markets in Europe has indicated a tipping point in the consumer packaged goods sector. According to the report, own labels are now outpacing the popularity of larger brands across almost all categories. The report has conducted a forensic analysis of the impact of the pandemic, inflation, and cost of living crisis for over 230 FMCG categories, 2000+ product segments, and more than 10 million SKUs.
The report shows strong growth of own labels in all six largest European markets, with Spain (47%) and Germany (41%) having the highest penetration, and the UK (37%) having the lowest, where many shoppers continue to buy brands that they trust. The study highlighted the fact that investments made by the retailers are paying off as more consumers perceive own labels to be innovative and just as good or better than many national brands that they compete with.
Now, own labels are no longer considered the ‘cheap’ alternative as more shoppers are buying them because they offer something new and of good quality. The report found that the proportion of consumers who say they are loyal to own labels now equals those who say they’re loyal to bigger brands. Moreover, 60% of all consumers surveyed said that own label products are as good as the big brands in areas such as innovation, quality, delivering on claims, sustainability, and good image.
Interestingly, 21% of undecided consumers who buy both said that they now consider own labels to be better than big brands. The report also showed that shoppers are choosing own labels for edible goods more than ever before. With the biggest price inflation being almost entirely centred on food categories, there has been a particularly high penetration of own labels in chilled, fresh, and ambient foods. Among non-food categories, there has been greater penetration in household care, especially staples such as laundry and hygiene items.
However, alcohol and some baby food items were found to be less vulnerable to own label growth, with well-known brands still prevailing in the alcohol category. Ananda Roy, global SVP, strategic growth insights at Circana, concluded that retailers have transformed private labels into strategy-led, consumer-focused, well-differentiated, and data-driven alternatives to national brands. National brands are now having to regard many retailers as significant competition that they can no longer ignore.
To conclude, retailers are winning on many fronts as private labels offer good value, quality, a range of benefits that meet shoppers’ dietary choices or lifestyles and can be trusted as much as national brands with high equity sitting on adjacent shelves. Shoppers enjoy discovering new products and experiences from private labels, telling others about them as it makes them feel better informed, and getting a smart deal that is ultimately a good value without compromises. Retailers have gained more loyalty and share as a result, which could change the shape of grocery retail in the future.
