Contrary to expectations, brands have outperformed own label in both value and volume terms. James Ball asks how they've managed to pull it off
This year was meant to be own label's time in the sun. Recession-struck shoppers, the story ran, would save money by ditching racy brands for their dowdier own-label cousins.
But despite the credit crunch, food inflation and massive supermarket campaigns promoting own label, new figures exclusive to The Grocer show that brands ain't beat yet. Not only are they outgrowing own label in value terms, they are also winning the war when it comes to the number of packs sold - indeed they are actually taking market share from own label.
The high level of food inflation, of course, flatters sales figures. But even by this measure, brands grew 7.3% year-on-year against own label's 6.6%, TNS figures [12w/e 22 February] reveal. And looking at data on the number of packs sold the picture of what shoppers are doing is clearer still.
Brand sales have risen 3.0% since last year. By contrast, own label actually sold 0.7% fewer packs this year than last. This was particularly marked at Tesco where, despite its new Discounter and Market Value ranges, own-label volumes fell 3.8% while brand volumes rose 3.9%.
Across grocery as a whole, premium and healthy own-label ranges have been hardest hit . Sales of healthy eating own-label products fell 12.2%, almost four times more than the drop in sales of premium, which fell by 3.1%.
"The UK is unusual in that it has a premium own-label sector ," says TNS communications director Ed Garner. "Many of these lines are more expensive than brands, and part of what we are seeing is a shift from premium own label to brands, often the next tier down."
Healthy-eating products may be suffering because consumers think they are paying more for less, he adds.
Trading down
While consumers are trading down from premium own label to brands, there is no similar wholesale trend away from brands to standard own label. Garner suggests standard own label could be suffering from a lack of differentiation from budget offerings.
"Standard private label has no real brand beyond that of the retailer, which may be why it struggles to pick up those downtrading from premium. Some either switch to brands or skip a tier," he says.
And shoppers certainly are skipping tiers: budget own-label sales are rocketing. Sales are up 44.4% on last year, while packs sold are up 21.8% on last year.
Such success has a downside, however, as it often comes at the expense of sales of higher-margin own-label products.
"The reason for the huge shift to budget is complicated," says Garner. "While consumers often don't pay detailed attention to prices, they see a value label and will often switch if it's cheaper.
"This is then multiplied by the retailers, through stockpiled budget stock and their advertising campaigns. The downside for retailers is this is self-imposed deflation, which can hit their market share."
But own label isn't unique in devaluing its offer, as evidence shows branded players are also working defensively on price.
New data from IRI comparing the basket price of 20 own-label lines with 20 branded equivalents, shows that the price difference between own label and brands is narrowing. Last year, the branded basket commanded a 31% price premium over its own-label equivalent. This year, that had fallen six percentage points to 25%.
"The trend for the price gap between branded and own-label to close is continuing," says IRI's business unit director, grocery, Mark Wilkinson. "Both have increased, but own label is going up quicker, albeit from a lower base."
This supports research from The Grocer 33 database in the autumn (The Grocer, 6 Sept 2008, p19), which found the brand premium was shrinking as own-label prices rose.
The narrower gap makes own label look less attractive, says Wilkinson . "The core issue for brands is the size of the price gap relative to consumers' perception of quality," he says.
"This is why brands are continuing to invest in above-the-line marketing despite the downturn. You've got to justify your brand's pricing."
Allowing the brand premium to shrink has been a driver of the continued success enjoyed by the brands , and to date has not had a major detrimental impact on the margins or profitability of their owners .
Promotions
Some observers are more concerned about the cost of another tactic of many leading brands - promotions. The number of featured-space promotions in the big four supermarkets has increased almost 40% year-on-year, according to Assosia. Brands have now reclaimed space lost temporarily to own label, accounting for 90% of offers in this space .
"Last year saw a move from retailers to promote their own-label value and discount lines with an increasing amount of paid promotional space given over to these ," says Assosia MD Kay Staniland. "This was always going to be a short-term strategy and was in many ways more about column inches than who can provide the cheapest alternatives to brands.
"With consumers making a beeline for the big promotional displays, it's more important than ever for branded manufacturers to secure space within these areas. Featured space not only drives sales volume (if not always value) for the manufacturer, it's also a high-profile way of keeping brands in consumers' thoughts and ultimately in their baskets."
If brands are to continue to fend off own label, they will need to get the premium just right: too big and it will put off consumers, too small and the bottom line vanishes.
"It's still tough for everyone," says Garner. "But brands will be fine if they keep up their investment. What is happening is that if shoppers are paying more, they will be sharper eyed as to why. That's the biggest thing now. If you have a premium, justify it."
This year was meant to be own label's time in the sun. Recession-struck shoppers, the story ran, would save money by ditching racy brands for their dowdier own-label cousins.
But despite the credit crunch, food inflation and massive supermarket campaigns promoting own label, new figures exclusive to The Grocer show that brands ain't beat yet. Not only are they outgrowing own label in value terms, they are also winning the war when it comes to the number of packs sold - indeed they are actually taking market share from own label.
The high level of food inflation, of course, flatters sales figures. But even by this measure, brands grew 7.3% year-on-year against own label's 6.6%, TNS figures [12w/e 22 February] reveal. And looking at data on the number of packs sold the picture of what shoppers are doing is clearer still.
Brand sales have risen 3.0% since last year. By contrast, own label actually sold 0.7% fewer packs this year than last. This was particularly marked at Tesco where, despite its new Discounter and Market Value ranges, own-label volumes fell 3.8% while brand volumes rose 3.9%.
Across grocery as a whole, premium and healthy own-label ranges have been hardest hit . Sales of healthy eating own-label products fell 12.2%, almost four times more than the drop in sales of premium, which fell by 3.1%.
"The UK is unusual in that it has a premium own-label sector ," says TNS communications director Ed Garner. "Many of these lines are more expensive than brands, and part of what we are seeing is a shift from premium own label to brands, often the next tier down."
Healthy-eating products may be suffering because consumers think they are paying more for less, he adds.
Trading down
While consumers are trading down from premium own label to brands, there is no similar wholesale trend away from brands to standard own label. Garner suggests standard own label could be suffering from a lack of differentiation from budget offerings.
"Standard private label has no real brand beyond that of the retailer, which may be why it struggles to pick up those downtrading from premium. Some either switch to brands or skip a tier," he says.
And shoppers certainly are skipping tiers: budget own-label sales are rocketing. Sales are up 44.4% on last year, while packs sold are up 21.8% on last year.
Such success has a downside, however, as it often comes at the expense of sales of higher-margin own-label products.
"The reason for the huge shift to budget is complicated," says Garner. "While consumers often don't pay detailed attention to prices, they see a value label and will often switch if it's cheaper.
"This is then multiplied by the retailers, through stockpiled budget stock and their advertising campaigns. The downside for retailers is this is self-imposed deflation, which can hit their market share."
But own label isn't unique in devaluing its offer, as evidence shows branded players are also working defensively on price.
New data from IRI comparing the basket price of 20 own-label lines with 20 branded equivalents, shows that the price difference between own label and brands is narrowing. Last year, the branded basket commanded a 31% price premium over its own-label equivalent. This year, that had fallen six percentage points to 25%.
"The trend for the price gap between branded and own-label to close is continuing," says IRI's business unit director, grocery, Mark Wilkinson. "Both have increased, but own label is going up quicker, albeit from a lower base."
This supports research from The Grocer 33 database in the autumn (The Grocer, 6 Sept 2008, p19), which found the brand premium was shrinking as own-label prices rose.
The narrower gap makes own label look less attractive, says Wilkinson . "The core issue for brands is the size of the price gap relative to consumers' perception of quality," he says.
"This is why brands are continuing to invest in above-the-line marketing despite the downturn. You've got to justify your brand's pricing."
Allowing the brand premium to shrink has been a driver of the continued success enjoyed by the brands , and to date has not had a major detrimental impact on the margins or profitability of their owners .
Promotions
Some observers are more concerned about the cost of another tactic of many leading brands - promotions. The number of featured-space promotions in the big four supermarkets has increased almost 40% year-on-year, according to Assosia. Brands have now reclaimed space lost temporarily to own label, accounting for 90% of offers in this space .
"Last year saw a move from retailers to promote their own-label value and discount lines with an increasing amount of paid promotional space given over to these ," says Assosia MD Kay Staniland. "This was always going to be a short-term strategy and was in many ways more about column inches than who can provide the cheapest alternatives to brands.
"With consumers making a beeline for the big promotional displays, it's more important than ever for branded manufacturers to secure space within these areas. Featured space not only drives sales volume (if not always value) for the manufacturer, it's also a high-profile way of keeping brands in consumers' thoughts and ultimately in their baskets."
If brands are to continue to fend off own label, they will need to get the premium just right: too big and it will put off consumers, too small and the bottom line vanishes.
"It's still tough for everyone," says Garner. "But brands will be fine if they keep up their investment. What is happening is that if shoppers are paying more, they will be sharper eyed as to why. That's the biggest thing now. If you have a premium, justify it."
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