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PREMIUMIZATION HELPS PRIVATE LABEL PROSPER

PREMIUMIZATION HELPS PRIVATE LABEL PROSPER



Private label coffee is going further upmarket and evidence is growing that big retailers also see potential growth in sustainable private label coffee

A 2018 report by global measurement and data analytics company Nielsen described the global private label market as a “new retail revolution” that will affect the food industry around the world over the next five years “in ways we have never seen before.”

The company said the growth of the private-label sector would pose new challenges for brands and manufacturers across the globe, as retailers develop and market their own products rather multinational brands to meet changing consumer needs.

Nielsen information shows that private label products continue to gain share across all major geographies. “The relentless store expansion by retailers over the past decade has given shoppers more access to private label and to brands,” the report noted. “In recent years, e-commerce has given brands another way to reach the consumer. However, private-label growth is also being driven by the wider choice that the digital economy offers to consumers and the globalization of shopping trends.

“This growth is also accelerating wherever disruption is present in the trade structure. For example, we see this with the market share growth of discounters in the developed markets of Western Europe.

Equivalent to multinational brands?

“Many now see private label brands as being equivalent to or substitutable for multinational brands. When consumers consider quality, many view private label products are as good and getting better. For example, we see this with the extensions into premium private label products, where quality is very good. Examples include wine, specialty groceries, coffee and prepared/ready-to-cook chilled meals of restaurant quality,” Nielsen said.

In the US, natural and organic products, including those without certain ‘undesirable’ ingredients or those that meet certain criteria (non-GMO, sustainable), present a huge opportunity for developing value-added innovations, Nielsen said. While the largest brands have struggled to find growth with conventional products, a world of new opportunities exists for manufacturers of all sizes by catering to consumers’ desire for organic and sustainable goods.

“At the opposite end of the spectrum, in the case of discounter private label, the prices are significantly lower, yet quality is at least comparable with local brand leaders,” Nielsen said. “The value for money continuum – from premium through to budget private label – is being stretched, and retailers are innovating quickly to meet shopper expectations, which has strategic implications for brands.”

As Nielsen also noted, increasingly consumers are making category-by-category decisions, and retailers and brands need category expertise to understand consumers in every category.

“In many markets, private label offerings are becoming a local alternative to premium. So as retailers move into premium, they are positioning private label much closer to multinational brands.”

Nielsen said organic and natural are emerging trends helping top-performing retailers grow. In addition to meeting a consumer need, offering fresh options often boosts sales across the entire store. As the impact of digital continues to affect overall trips to the store, and as consumers buy more on-the-go meal solutions and seek out convenient products, it will be critical that retailers use the fresh departments (and the variety within them) to create experiences their customers will want to come back for.■ C&CI

This extract is from an article that first appeared in the September’18 issue of C&CI, click on subscribe now if you wish to read the article in full and other informative articles in the September and future issues of C&CI.

 

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