Private label brands are becoming increasingly popular and are often viewed as a more affordable option to national brands. However, according to Ananda Roy, Senior Vice-President at consumer behaviour analytics company Circana, it is a common misconception that consumers view private label brands as inferior in quality.
In a recent survey conducted by Circana, 60% of all consumers reported that they see private label brands as equal to national brands in areas such as innovativeness, quality, trust, delivering on their claims, sustainability, and good image. Interestingly, 25% of those surveyed even felt that private label brands were better than national brands, though the price was a factor. Among consumers who switch between private label brands and national brands at the weekly shop, 21% felt that national brands were superior in quality.
One advantage of private label brands is that they do not require high levels of product awareness like national brands. Private label brands can “borrow” the retailer’s brand equity, making them a natural choice for consumers.
According to Circana, private label brands have 37.8% of total FMCG value sales in Europe, amounting to approximately €229bn. Countries with the highest penetration of private label brands include Spain (47%), Germany (41%), and the Netherlands (40%), with Germany and the UK accounting for €66bn and €48bn respectively.
The success of private label brands is causing food manufacturers to rethink their strategies. According to Roy, food manufacturers are recognizing that private label brands are their third competitor and cannot be ignored. Manufacturers are responding by promoting themselves more heavily, investing in innovations, and occasionally offering lower-priced value packs.
Private label brands are increasingly appealing to consumers. According to Circana, consumers who are loyal to private label brands roughly equal those loyal to national brands across Europe, with the remaining consumers switching between the two. Furthermore, private label consumption has been growing across all countries surveyed.
During the cost-of-living crisis, the consumption of private label brands increased in value across all categories except alcohol. According to Roy, the appeal of private label brands is not just about their value-for-money, but also their quality. Retailers are targeting middle-class consumers who switch between national brands and private labels by offering premium, high-quality, sustainable, and innovative products.
