IRI report indicates small & mid-sized manufacturers losing ground in volume and value to private labels – Retail Times

The last semesterFMCG Demand SignalsThe IRI report revealed that private label brands now account for 36% of the total value of FMCG sales in Europe (€216bn), up from 34% previously. reported by IRI earlier this year. There has been strong market performance across European markets, particularly in Spain, where Private Label now accounts for 47% of total FMCG sales value; followed by Germany and the Netherlands (both with 39%). The UK and Germany continue to lead Private Label sales in absolute value.

Forensic analysis of the impact of the pandemic, inflation and cost of living crisis on more than 230 FMCG categories, more than 2000 product segments and more than 100 million SKUs in the US and several of the largest markets in Europe and Asia Pacific (France, Italy, Germany, Spain, UK and the Netherlands); the report, which covers store purchase data and a survey of 12 global markets.

The report details how fewer retail promotions after the pandemic have given way to a targeted return to lower prices every day on a basket of 150 consumer staples this year; to help mitigate the impact of food price inflation. Retailers are trying to manage the impact of rising prices by optimizing range, pack sizes and price points, but strategies differ by category and value level, and one of the biggest beneficiaries has been private label brands .

“Private brands have traditionally offered buyers lower prices,” he said. Ananda Roy, Global Senior Vice President, Strategic Growth Outlook, IRI, “but these are not sustainable and the inflationary price increases have been greater than in the recognized brands. However, this has not curbed demand, especially in the chilled and fresh, room temperature and frozen segments in the food categories, and home and personal care in the non-food categories.”

“Our research has shown this is because around 60% of consumers believe that Private Labels are as good as National Brands in terms of quality, innovation, sustainability, trustworthiness and fulfillment of claims, and 25% say that some Private Labels are ‘even better’ than National Brands. This is a significant change from previous periods.

It is fair to say that private labels are poised to be the ‘third competitor’ to national brands in several FMCG categories, having morphed into differentiated, strategy-driven, data-driven substitutes. Their ability to increase value, volume and attract new consumers is a growing risk for small and mid-sized manufacturers, the ‘squeezed middle’, which could begin to find it difficult to competitively match private labels as economic conditions worsen. . IRI anticipates that a price war is increasingly likely in early 2023 and thereafter as the outlook for consumer goods demand darkens.

Another recent trend is among UK retailers who have created new products with artisan food brands from small manufacturers or restaurant chains to add brand recognition and quality perception into their private label portfolio for higher margin.

Post pandemic until today

Throughout the pandemic, national brands outperformed private labels, and consumers took comfort in buying brands they knew, trusted and could easily find in-store or online during tough times. In the current inflationary environment, private label brands are returning to pre-pandemic levels as consumers question their loyalty to national brands, and retailers expand the range of high-quality, innovative and well-priced options. Discount stores have expanded their portfolio of small-format stores in city centers and suburbs, making these products available to a broader group of consumers who may not have been willing to travel to out-of-town stores before. . This has led value sales to grow by +5.4% so far in 2022 (+3.0% MAT 2022). In particular, only Italy is showing strong growth in both Private Label and National Brands.

Key factors

Growth in 2022 to date is being mainly driven by the Food categories (+5.3%), taking its contribution to €191Bn, with the Chilled & Fresh, Frozen and Beverage categories growing. Of note, however, is alcohol, which has seen a 5% or £3.4bn decline in value sales through 22 July compared to a year ago and 6.7% year-to-date in 2022.

Non-food private label brands are growing at a rapid rate in two of the largest private label markets, Germany and Spain, and across Europe, three times the total private label market in the last four weeks alone, generating €25 billion .

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