Time was when, to most consumers, supermarket own label conjured up the image of plastic bags of muesli stamped with large black letters, cheap jam with even cheaper plain white labels, and a plethora of no-frills products which added about as much colour to the average British kitchen as a whitewashed wall.
Those days are long gone, with a general consensus among supermarket operators and manufacturers worldwide that the UK is very much the pioneer of modern-day own label retailing. Consumers in this country have not only come to trust own label products implicitly but the segmentation work carried out by the likes of Sainsbury and Tesco means supermarket shoppers are now offered a vast array of retailer branded propositions everything from better-for-you products to premium ranges.
So why do new figures from ACNielsen for the Private Label Manufacturers Association show that own label has suffered a six-year consistent dip in fortunes? ACNielsen says Britain's own label market slipped by 0.5% last year to record a 38.5% value share of the market across more than 2,000 product categories. This amounted to £265m of lost sales compared with 2001.
The ongoing slump comes after 15 years of consistent growth up to the late 1990s. And while the decline may seem modest when compared with the overall size of the grocery market, it is nonetheless puzzling given the flurry of launch activity in the last 12 months by all retailers which has at times made branded suppliers look almost inactive.
Perhaps even more surprising is that no-one in the analyst community is able to give a convincing argument for the drop. Some think it may be down to the fact the market has peaked, others that it reflects the intense price competition between branded and own label products in many categories. There are also those who feel it may reflect the efforts by retailers to push their premium ranges which will never generate the sales volumes of more mainstream products.
The retailers are not too keen to join the debate. None of the big four managed to put anyone up for interview for this feature and a Tesco spokesman admitted: "This is not the kind of thing we would wish to comment on."
However, turn to the manufacturing community and a number of theories appear to be doing the rounds. One particularly stinging charge is that consumers have noticed that own label quality is not as good as it purports to be.
Turning out inferior product'
One manufacturer, which prefers to remain anonymous, says that it recently abandoned its own label programme because battles over price with the multiples meant it was "turning out a much inferior product" than it had been previously. It is not alone.
Northern Ireland-based ready meals and ingredients specialist Ferne Foods used to supply "most of the major multiples" but got out of the own label market three years ago for similar reasons.
The company's marketing manager, Billy Hamilton, says: "We found we could no longer make any money out of own label in the retail business. It was driven by price, not quality and it now appears the consumer may be tiring of own label and declining product quality could be one reason."
This gripe is not only expressed by manufacturers operating in those own label categories with declining sales.
Confectionery, for example, remains one of a minority of own label categories enjoying an increase in market share against the brands, according to ACNielsen. Yet suppliers in the sector are still not happy.
A spokeswoman for one leading supplier, which balances a buoyant branded business with its own label arm, says: "Own label sales are doing well because retailers are squeezing us on price so they can undercut the brands. The major confectionery brands are in a much stronger bargaining position than own label suppliers as the multiples have to stock them because of consumer demand. It means it drives some of our categories down into the commodity sector. At the end of the day, everyone dealing with own label will lose out because there will be no money left for product development."
But in light of the new range launches by retailers this year, does that argument really stack up? Is there a lack of genuinely innovative NPD? Paul Beresford, MD of Cambridge Market Research, which organises consumer panels to test hundreds of new products every year, says: "The percentage of own label products which made our annual Top 100 list of most highly rated new products fell to 28% last year, from 30% in 2001. This was despite the fact that the own brand share of all new products tested during the year increased from 35% to 39%.
"Our take on the market is that own label is as active as ever, but that retailers are focusing their attention on premium sectors of the market. They are clearly looking beyond even these propositions to specialist ranges, as Sainsbury is with Freefrom (see p38), as part of their strategies to differentiate their offer and seek profitable new niche opportunities.
"Inevitably, these are not as universally popular as, say, a new mainstream premium crisp like Walkers' Sensations."
Certainly, this theory would fit with the contention that the big supermarkets no longer dream of trying to grow own label share to more than 50% of sales.
As for manufacturers, many are now looking to the smaller retail groups, where own label has a much lower penetration, to stimulate growth.
{{ANALYSIS }}
Those days are long gone, with a general consensus among supermarket operators and manufacturers worldwide that the UK is very much the pioneer of modern-day own label retailing. Consumers in this country have not only come to trust own label products implicitly but the segmentation work carried out by the likes of Sainsbury and Tesco means supermarket shoppers are now offered a vast array of retailer branded propositions everything from better-for-you products to premium ranges.
So why do new figures from ACNielsen for the Private Label Manufacturers Association show that own label has suffered a six-year consistent dip in fortunes? ACNielsen says Britain's own label market slipped by 0.5% last year to record a 38.5% value share of the market across more than 2,000 product categories. This amounted to £265m of lost sales compared with 2001.
The ongoing slump comes after 15 years of consistent growth up to the late 1990s. And while the decline may seem modest when compared with the overall size of the grocery market, it is nonetheless puzzling given the flurry of launch activity in the last 12 months by all retailers which has at times made branded suppliers look almost inactive.
Perhaps even more surprising is that no-one in the analyst community is able to give a convincing argument for the drop. Some think it may be down to the fact the market has peaked, others that it reflects the intense price competition between branded and own label products in many categories. There are also those who feel it may reflect the efforts by retailers to push their premium ranges which will never generate the sales volumes of more mainstream products.
The retailers are not too keen to join the debate. None of the big four managed to put anyone up for interview for this feature and a Tesco spokesman admitted: "This is not the kind of thing we would wish to comment on."
However, turn to the manufacturing community and a number of theories appear to be doing the rounds. One particularly stinging charge is that consumers have noticed that own label quality is not as good as it purports to be.
Turning out inferior product'
One manufacturer, which prefers to remain anonymous, says that it recently abandoned its own label programme because battles over price with the multiples meant it was "turning out a much inferior product" than it had been previously. It is not alone.
Northern Ireland-based ready meals and ingredients specialist Ferne Foods used to supply "most of the major multiples" but got out of the own label market three years ago for similar reasons.
The company's marketing manager, Billy Hamilton, says: "We found we could no longer make any money out of own label in the retail business. It was driven by price, not quality and it now appears the consumer may be tiring of own label and declining product quality could be one reason."
This gripe is not only expressed by manufacturers operating in those own label categories with declining sales.
Confectionery, for example, remains one of a minority of own label categories enjoying an increase in market share against the brands, according to ACNielsen. Yet suppliers in the sector are still not happy.
A spokeswoman for one leading supplier, which balances a buoyant branded business with its own label arm, says: "Own label sales are doing well because retailers are squeezing us on price so they can undercut the brands. The major confectionery brands are in a much stronger bargaining position than own label suppliers as the multiples have to stock them because of consumer demand. It means it drives some of our categories down into the commodity sector. At the end of the day, everyone dealing with own label will lose out because there will be no money left for product development."
But in light of the new range launches by retailers this year, does that argument really stack up? Is there a lack of genuinely innovative NPD? Paul Beresford, MD of Cambridge Market Research, which organises consumer panels to test hundreds of new products every year, says: "The percentage of own label products which made our annual Top 100 list of most highly rated new products fell to 28% last year, from 30% in 2001. This was despite the fact that the own brand share of all new products tested during the year increased from 35% to 39%.
"Our take on the market is that own label is as active as ever, but that retailers are focusing their attention on premium sectors of the market. They are clearly looking beyond even these propositions to specialist ranges, as Sainsbury is with Freefrom (see p38), as part of their strategies to differentiate their offer and seek profitable new niche opportunities.
"Inevitably, these are not as universally popular as, say, a new mainstream premium crisp like Walkers' Sensations."
Certainly, this theory would fit with the contention that the big supermarkets no longer dream of trying to grow own label share to more than 50% of sales.
As for manufacturers, many are now looking to the smaller retail groups, where own label has a much lower penetration, to stimulate growth.
{{ANALYSIS }}
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