Shoppers traded down to own label in droves when the economy faltered, but retailers have been working hard to make sure they don't trade back up, finds Guy Sheppard
Own label hit the headlines last November when thwarted shoppers turned to eBay, bidding up to £250 for Heston Blumenthal's Hidden Orange Christmas Pudding for Waitrose (rsp: £13.99 for 1.2kg).
The story is significant because own label is at a crossroads. Demand was boosted by the recession, but brands have fought back over the past year with an intense barrage of promotional activity. This has in turn prompted retailers to up the ante by revamping their own-label ranges (see page 56) and investing heavily in strong-growth, high-margin premium products such as the Heston Blumenthal pudding.
But with the price gap between branded and own-label now at a historic low, can own label maintain the momentum?
Interest in own label has never been greater next month's PLMA World of Private Label (see p58) is the biggest yet. But consumer spend on branded food grew marginally faster last year [Kantar Worldpanel 52w/e 23 January 2011] and Mintel predicts that the category will have grown 24% in the five years to 2015, down from 25% in the previous five years [Private Label Food and Drink UK, March 2011].
Whether we're going to see a marked shift back to branded is difficult to say, but the growth of own label is undoubtedly being constrained by the unparalleled levels of branded promotions, believes Bryan Roberts, retail insights director of Kantar Retail, and a speaker at World of Private Label.
However, he believes the long-term prospects for the category remain strong. "Own label has become an established part of shoppers' repertoires, regardless of the economy," he explains. "I believe its general trajectory will remain in an upwards direction for many years to come."
Belinda Youngs, own-brand director at Morrisons, agrees. "Trends imply that own label will continue to grow, particularly in areas associated with 'added value'," she says. "The big four dominate, but there is very little difference between them in strategy or architecture. In the current time of austerity it is clear the customer values 'value', not just price, and retailers need to resist the urge to fall back purely on price when all indicators lead to the persistent opportunity to add value."
One of the most successful new own-label ranges is Essential Waitrose, launched in 2009 and already accounting for 17% of sales, according to the retailer.
But Waitrose has also invested in its Seriously range of desserts and its recently acquired Duchy brand at the other end of the pricing spectrum. Asda, meanwhile, may have hailed its Chosen by You rebranding exercise for 3,500 products as the biggest own-label relaunch in UK retailing history, but it has tweaked its Extra Special range, too.
Finest and Taste the Difference have also been revamped by Tesco and Sainsbury's respectively. The Co-operative is preparing to relaunch its Truly Irresistible range in May and Morrisons is gearing up to overhaul its entire own-label offer in the wake of Youngs' December appointment. "Customer-led development of the own-label programme will be a major part of the company's strategic development in 2011-2015," she says.
The increasing breadth and sophistication of own-label ranges is consigning any stigma that was once attached to the sector to history, believes Datamonitor consumer analyst Mark Whalley. "A decade or so ago, own label was regarded with scepticism as a cheaper alternative," he says. "Now, there may be two or three different tiers, from the very cheap to lines that are a step up."
He cites a Datamonitor survey of more than 1,100 consumers that reveals three-quarters saw no difference between own-label and branded products, while 20% found the former superior.
Faced with mounting competition from own label, brands cannot just promote their way out of trouble, he says. "Brands can no longer rely on own label simply being the cheap alternative," he says. "It's putting huge pressure on them to improve their products and marketing."
That pressure is only heightened by the increasingly clever guises own label is adopting in its fight to grab market share. The growing raft of tertiary brands such as Tesco's Yoo yoghurt brand and its City Kitchen ready meals brand are case in point. The fact shoppers don't always realise they are buying own-label ranges can be advantageous to retailers who fear their own brand is becoming too ubiquitous.
There are potential downsides to tertiary brands, of course. "Cohesiveness is a massive principle that retailers should think about," warns Jonathan Ford, creative partner of brand designer Pearlfisher. "There is a fragmented own-label presence in their stores, compounded when they start to create a whole new offer."
Retailers are increasingly treating own-label ranges as brands in their own right, but this too is not without potential challenges. "The issue is whether retailers are going to invest in supporting their sub-brands," says Guy Douglas, MD of branding experts BOS. He argues that treating them as proper brands entails all the advertising and public relations support used by brands, but past experience suggests this rarely lasts beyond the initial launch period.
But offers such as Yoo and City Kitchen only go to show how clever own label is boxing these days. Brian Sharoff, president of PLMA, certainly believes it has the upper hand over branded in the current market. "To me, today's retailers are so close to the consumer that they are, in effect, the first line of antennae."
Kerry Foods innovation director David Hamilton agrees. "Supermarkets understand their consumers better than anyone," he says. They may well do, but beating the brands at their own game will take more than customer insight. As Douglas hinted, much will depend on whether the retailers are prepared to invest in own label. The next couple of years will be interesting.
PLMA Show: key facts
Where: RAI Exhibition Centre, Amsterdam
When: 24-25 May 2011
What: PLMA's biggest exhibition yet, featuring more than 3,600 stands and attracting buyers from the world's leading supermarkets, department stores and wholesalers.
Visit: www.plmainternational.com
World of Private Label
Visitor profile: Retail and wholesale/executives from supermarkets, hyper-markets, drugstores, discounters, depart-ment stores, speciality stores, DIY chains, cash & carries, hospitality, along with buying groups, importers and exporters.
Exhibitor profile: There will be nearly 2,000 exhibitors, including suppliers of fmcg goods, both food and non-food, from more than 70 countries.
Exhibits will be spread across the two complexes of the RAI Exhibition Centre as follows:
Europa Complex: Food Fresh and frozen Ingredients
Holland Complex: Non-food and food
Parkhal: Non-food and food
Special Feature: The Idea Supermarket will display private-label ranges from more than 60 retailers.
Special Feature: The New Product Expo, running alongside the Idea Supermarket, will showcase the latest innovations in private label.
Pre-show seminars: The latest trends and research will be discussed during a two-hour session at the RAI Forum Centre on 23 May, which will include the latest country-by-country market share statistics from Jean-Jacques Vandenheede, European business insight director at The Nielsen Company.
Attendees will also learn about the private-label strategy of Europe's five leading retailers from Bryan Roberts, retail insights director at Kantar Retail, and can hear what the EU is to do about private-label growth from Paul Skehan, director of ERRT in Brussels.
Focus On Own Label & PLMA Show Preview
Own label hit the headlines last November when thwarted shoppers turned to eBay, bidding up to £250 for Heston Blumenthal's Hidden Orange Christmas Pudding for Waitrose (rsp: £13.99 for 1.2kg).
The story is significant because own label is at a crossroads. Demand was boosted by the recession, but brands have fought back over the past year with an intense barrage of promotional activity. This has in turn prompted retailers to up the ante by revamping their own-label ranges (see page 56) and investing heavily in strong-growth, high-margin premium products such as the Heston Blumenthal pudding.
But with the price gap between branded and own-label now at a historic low, can own label maintain the momentum?
Interest in own label has never been greater next month's PLMA World of Private Label (see p58) is the biggest yet. But consumer spend on branded food grew marginally faster last year [Kantar Worldpanel 52w/e 23 January 2011] and Mintel predicts that the category will have grown 24% in the five years to 2015, down from 25% in the previous five years [Private Label Food and Drink UK, March 2011].
Whether we're going to see a marked shift back to branded is difficult to say, but the growth of own label is undoubtedly being constrained by the unparalleled levels of branded promotions, believes Bryan Roberts, retail insights director of Kantar Retail, and a speaker at World of Private Label.
However, he believes the long-term prospects for the category remain strong. "Own label has become an established part of shoppers' repertoires, regardless of the economy," he explains. "I believe its general trajectory will remain in an upwards direction for many years to come."
Belinda Youngs, own-brand director at Morrisons, agrees. "Trends imply that own label will continue to grow, particularly in areas associated with 'added value'," she says. "The big four dominate, but there is very little difference between them in strategy or architecture. In the current time of austerity it is clear the customer values 'value', not just price, and retailers need to resist the urge to fall back purely on price when all indicators lead to the persistent opportunity to add value."
One of the most successful new own-label ranges is Essential Waitrose, launched in 2009 and already accounting for 17% of sales, according to the retailer.
But Waitrose has also invested in its Seriously range of desserts and its recently acquired Duchy brand at the other end of the pricing spectrum. Asda, meanwhile, may have hailed its Chosen by You rebranding exercise for 3,500 products as the biggest own-label relaunch in UK retailing history, but it has tweaked its Extra Special range, too.
Finest and Taste the Difference have also been revamped by Tesco and Sainsbury's respectively. The Co-operative is preparing to relaunch its Truly Irresistible range in May and Morrisons is gearing up to overhaul its entire own-label offer in the wake of Youngs' December appointment. "Customer-led development of the own-label programme will be a major part of the company's strategic development in 2011-2015," she says.
The increasing breadth and sophistication of own-label ranges is consigning any stigma that was once attached to the sector to history, believes Datamonitor consumer analyst Mark Whalley. "A decade or so ago, own label was regarded with scepticism as a cheaper alternative," he says. "Now, there may be two or three different tiers, from the very cheap to lines that are a step up."
He cites a Datamonitor survey of more than 1,100 consumers that reveals three-quarters saw no difference between own-label and branded products, while 20% found the former superior.
Faced with mounting competition from own label, brands cannot just promote their way out of trouble, he says. "Brands can no longer rely on own label simply being the cheap alternative," he says. "It's putting huge pressure on them to improve their products and marketing."
That pressure is only heightened by the increasingly clever guises own label is adopting in its fight to grab market share. The growing raft of tertiary brands such as Tesco's Yoo yoghurt brand and its City Kitchen ready meals brand are case in point. The fact shoppers don't always realise they are buying own-label ranges can be advantageous to retailers who fear their own brand is becoming too ubiquitous.
There are potential downsides to tertiary brands, of course. "Cohesiveness is a massive principle that retailers should think about," warns Jonathan Ford, creative partner of brand designer Pearlfisher. "There is a fragmented own-label presence in their stores, compounded when they start to create a whole new offer."
Retailers are increasingly treating own-label ranges as brands in their own right, but this too is not without potential challenges. "The issue is whether retailers are going to invest in supporting their sub-brands," says Guy Douglas, MD of branding experts BOS. He argues that treating them as proper brands entails all the advertising and public relations support used by brands, but past experience suggests this rarely lasts beyond the initial launch period.
But offers such as Yoo and City Kitchen only go to show how clever own label is boxing these days. Brian Sharoff, president of PLMA, certainly believes it has the upper hand over branded in the current market. "To me, today's retailers are so close to the consumer that they are, in effect, the first line of antennae."
Kerry Foods innovation director David Hamilton agrees. "Supermarkets understand their consumers better than anyone," he says. They may well do, but beating the brands at their own game will take more than customer insight. As Douglas hinted, much will depend on whether the retailers are prepared to invest in own label. The next couple of years will be interesting.
PLMA Show: key facts
Where: RAI Exhibition Centre, Amsterdam
When: 24-25 May 2011
What: PLMA's biggest exhibition yet, featuring more than 3,600 stands and attracting buyers from the world's leading supermarkets, department stores and wholesalers.
Visit: www.plmainternational.com
World of Private Label
Visitor profile: Retail and wholesale/executives from supermarkets, hyper-markets, drugstores, discounters, depart-ment stores, speciality stores, DIY chains, cash & carries, hospitality, along with buying groups, importers and exporters.
Exhibitor profile: There will be nearly 2,000 exhibitors, including suppliers of fmcg goods, both food and non-food, from more than 70 countries.
Exhibits will be spread across the two complexes of the RAI Exhibition Centre as follows:
Europa Complex: Food Fresh and frozen Ingredients
Holland Complex: Non-food and food
Parkhal: Non-food and food
Special Feature: The Idea Supermarket will display private-label ranges from more than 60 retailers.
Special Feature: The New Product Expo, running alongside the Idea Supermarket, will showcase the latest innovations in private label.
Pre-show seminars: The latest trends and research will be discussed during a two-hour session at the RAI Forum Centre on 23 May, which will include the latest country-by-country market share statistics from Jean-Jacques Vandenheede, European business insight director at The Nielsen Company.
Attendees will also learn about the private-label strategy of Europe's five leading retailers from Bryan Roberts, retail insights director at Kantar Retail, and can hear what the EU is to do about private-label growth from Paul Skehan, director of ERRT in Brussels.
Focus On Own Label & PLMA Show Preview
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