ireland private label report - worldwide | … buying private label was about paying a lower price...
TRANSCRIPT
2 IRELAND PRIVATE LABEL REPORT
PRIVATE LABEL FROM PAST TO PRESENT…The Irish FMCG market has experienced a rollercoaster of change over
the last 10 years. Convenience, indulgence, health and wellbeing were
key growth drivers in the past but now as the economic situation puts
pressure on consumers’ pockets, a focus on value, price, promotions
and private label are becoming more prevalent in consumers’ minds
and this is borne out in their ‘new’ shopping behaviours.
Traditionally buying private label was about paying a lower price for a
limited range of essential grocery items and for this lower investment
you accepted a trade off in quality and packaging. This is no longer
the case. Consumer acceptance of private label has grown and
continues to grow as comparable, and in some cases higher quality
product ranges become available, and private label lead the way with
innovation in certain categories to better serve consumer’s needs.
As our latest Nielsen Consumer Confidence Survey Q4 2012 shows,
the index in Ireland dropped -2 points last quarter and remains low
at 65¹. Consumers are turning to private label as a belt tightening
strategy and are finding that it is not necessarily the step down or
trade off they were expecting. Retailers traditionally used own branded
sku’s as a point of differentiation to competitors. However, now
given its growth, retailers are investing in own label themselves as
a ‘brand’ and are using tiered private label to address profitability.
Manufacturers find themselves in a position where some of their key
competitors are owned by the people that they need to make their
business possible. The old notions of private label being for private
label buyers, low income or larger households, are no longer true.
Private label items now make their way into a high percentage of
shopping trolleys across various categories and have become relevant
for all types of households from all demographics and for all shopping
trip types. The question now is how to find a three-way win for retailer,
manufacturer and consumer.
THE SHIFT INTO PRIVATE LABEL IN PARTICULAR, IS A TREND THAT WOULD NOT HAVE BEEN PREDICTED OF THE LOYAL IRISH BRAND BUYERS BUT HAS BECOME A STARTLING REALITY THAT IMPACTS MANUFACTURERS, RETAILERS AND CONSUMERS IN DIFFERENT WAYS.
Elaine Wade,
Business Unit Director,
Nielsen Ireland
3Copyright © 2013 The Nielsen Company
PRIVATE LABEL IN NUMBERS …The most recent Nielsen retail data shows private label value sales
in the latest 52 weeks valued at €2.3bn and growing by 7.8%². This
represents a 22% share of the total available Nielsen basket sales.
Over the same period branded goods account for €8.2bn, however,
sales are declining -1% versus the same period a year ago. German
discounter stores Aldi and Lidl are contributing to the overall strength
of private label with the majority of their grocery sales going through
private label items. These discounter stores continue to grow from
strength to strength in Ireland. Now accounting for 14% share, and
growing by 15% year on year, as they continue with aggressive store
openings to further increase their reach of the population, and
continued strong above-the-line support.
As illustrated in Chart 1 below private label share remains highest in
the chilled/frozen, canned, grocery and household categories where
it is more challenging for brands to differentiate themselves from
store owned brands. However, private label share in alcohol, baby and
health & beauty remain the weakest, and interestingly it is in these
categories we see highest investment in brand equity and some of the
strongest levels of emotional involvement in product purchase.
It is important to note that the private label phenomenon has
not been restricted to the Multiple retailers either. As increasing
unemployment, increasing fuel prices and the end of ‘breakfast
roll’ era caused significant decline for the convenience sector, these
retailers are now actively offering consumers own branded ranges to
help drive footfall back into store and offer value in key categories
to shoppers. While the private label shares in the convenience trade
(Chart 1) are much lower than their multiple equivalents, share is
increasing in all categories.
+7.8% 22%GROWTH YOY
SHARE OF TOTAL AVAILABLE NIELSEN BASKET SALES
PRIVATE LABEL IS WORTH €2.3BN
4 IRELAND PRIVATE LABEL REPORT
CHART 1 - PRIVATE LABEL VALUE SHARE OF KEY CATEGORY BASKETSMAT TO 30th DECEMBER 2012
Source: Nielsen Total Coverage - Strategic Planner MAT 30th Dec 2012
Value Share of Total Coverage Value Share of Convenience
8.9 2
22
25.7
35.8
5.9
5.2
41.1 10.8
51.7 15.3
18.4 4.1
14.1
3
18.8
15.1
12.8
PRIVATE LABEL
BAKERY
CANNED FOOD
CHILLED/FROZEN
CONFECTIONERY
HEALTH & BEAUTY
HOUSEHOLD
4.8 0.4
36.6 19.4
GROCERY
LONG ALCHOHOL
SPIRITS
WINE
5Copyright © 2013 The Nielsen Company
SO HOW HAVE THEY ACHIEVED THIS SUCCESS…One of the key benefits that retailers have over manufacturer brands is that
their private label is essentially a ‘superbrand’. These brands do not just
compete in one FMCG category but across almost every product category
available in store. While some major brands do cross several categories,
there are virtually none that cover the breadth that private label ranges do.
In more recent times, as consumers trust of private label has grown, we
have seen their brands drive growth outside of FMCG with a much broader
range of products and services such as telecommunications, financial
services, clothing, insurance and household goods. In reality these really
cannot be considered a ‘label’ any longer but a private or store owned
‘brand’ and understanding this is the key to understanding their success.
Retailers have started to really use all of the traditional brand growth
levers to expand the breadth and success of private label - price, ranging,
innovation, sustainability, market research, merchandising, marketing
activity and cost management to name but a few. This is how they are
growing.
With an average grocery price differential of approximately 33%⁴, store
brands traditionally used price and only price, as the key driver for
customer recruitment. However, recent years have seen their strategy
move away from this to a more sophisticated range of products with tiers
that respond to their customer needs e.g. quality, value, organic, fair trade,
on the go, free from or kids. While competitive pricing still remains a key
weapon in their arsenal, they now have a wider scope to differentiate.
In some cases store brands can actually be one of the more expensive
offerings for the more affluent consumer, for example; ‘Tesco Finest’,
Dunnes ‘Simply Better’ and Marks & Spencer’s ‘Simply’. They invest
heavily in research so that they can understand their consumers
and identify the key footfall and purchase drivers in-store. They also
continuously track performance to ensure they are on top of their game
and ahead of the competition.
The sheer size of retailers allows them the flexibility to offer tailored
solutions for different store formats and different purchase occasions.
They are also very quick to identify consumer needs and offer unique
solutions such as M&S ‘Dine in for 2’ at a special price, or SuperValu’s
‘Prepared by the Butcher’.
The reality is that store brands actually mirror the retailer that owns it and
is synonymous with their corporate offering – it has become very closely
linked with banner equity. Consumers trust that the retailers are doing the
best for them and this transfers into a trust of their store brand offerings.
6 IRELAND PRIVATE LABEL REPORT
STRONG COMMUNICATION OF OWN BRAND OFFERINGSRetailers are also continuing to invest heavily in TV advertising to
get their message to the consumer. All five multiple channels are in
the top 20 advertising spenders ⁵. Similar to their in-store strategy,
traditional store brand advertising used price as the hook and
engaged with consumers from a rational point of view. However,
recently they have chosen to focus on other touch points such as
humour, Irishness, premium/luxury offerings or occasions. This is
helping them build that emotional appeal that brands have built over
the years.
Take for example SuperValu’s strong communication around their
new store brand range in 2012 where they focused on being strong
advocates of local business, Irish jobs, reassuring the customer
that all products are quality assured and independently taste tested
against leading brands. In a time when our economy and consumer
spend is under so much pressure and unemployment rates are high,
this has allowed SuperValu to engage with consumers on another
level.
7Copyright © 2013 The Nielsen Company
Source: Nielsen AdDynamix 2013
Aldi’s ‘Like brands, only cheaper’ campaign also reassured consumers
about the quality of their ranges by using humour and the retailer
also cleverly focused on the ‘Irish’ aspect in their ‘Love Ireland, Like
Aldi’ campaign, highlighting strong Irish sourcing credentials and
partnerships with local farmers.
8 IRELAND PRIVATE LABEL REPORT
The extensive range, product development and improvement in
quality and packaging for store brand ranges over the years has
led to an erosion of the traditional negative stigma of private label.
Nielsen’s latest New Products Sentiment Survey⁷ reveals that 67% of
respondents said they would buy a new product store brand or value
option when available, indicating openness to buying Private Label.
(Chart 2)
Nielsen Online Survey Q3 2012 – New Product Purchase Intentions Sentiment Survey
PPERCENT IRELAND RESPONDENTS THAT DEFINITELY/SOMEWHAT AGREE TO THE GENERAL PURCHASE OF NEW PRODUCTS
67% 63% 60%
I WILL PURCHASE A STORE BRAND OR VALUE OPTION WHEN AVAILABLE
I AM GENERALLY WILLING TO SWITCH TO A NEW BRAND
I PREFER TO BUY NEW PRODUCTS FROM BRANDS FAMILIAR TO ME
23%
I AM AN EARLY PURCHASER OF NEW PRODUCT INNOVATION
47% 40% 28%
ECONOMIC CONDITIONS AND RECENT WORLD EVENTS MAKE ME LESS LIKELY TO TRY NEW PRODUCTS
I PREFER TO PURCHASE LOCAL BRANDS OVER LARGE GLOBAL BRANDS
I AM WILLING TO PAY A PREMIUM PRICE FOR INNOVATIVE NEW PRODUCTS
58% 56% 54% I LIKE WHEN MANUFACTURERS OFFER NEW PRODUCT OPTIONS
I WAIT UNTIL A NEW INNOVATION HAS PROVEN ITSELF BEFORE PURCHASING
I LIKE TO TELL OTHERS ABOUT NEW PRODUCTS I HAVE PURCHASED
9Copyright © 2013 The Nielsen Company
LESS EXPENSIVE THAN NAMED BRANDS - 64%
THEY OFFER REALLY GOOD VALUE FOR MONEY - 41%
QUALITY JUST AS GOOD AS NAMED BRANDS - 40%
QUALITY OF STORE BRANDS IS IMPROVING - 31%
WORD OF MOUTH. OTHERS HAVE RECOMMENDED THEM - 12%
PRODUCTS I WANT ARE ONLY AVAILABLE IN STORE BRANDS - 5%
ALL OTHER - 1%
NONE - 3%
DON'T KNOW/NOT SURE - 2%
It cannot be denied that recent economic trends and pressure
on consumer pockets has helped the more recent surge towards
store brand growth. Price remains high on consumers ‘reason for
purchase’ list , however they are becoming increasingly accepting
that the quality is just as good as named brands and that they are
really good value for money (Chart 3). Price is one of the key triggers
for purchase, however, if the quality is not there, consumers will
not return, and retailers are ensuring that quality is high on their
store brand agenda. Consumers see retailers as looking after their
needs in terms of reducing weekly shopping bills and offering them
value and this trust comes through the private label ranges in store.
Furthermore, they have indicated strongly that their intention is to buy
even more private label in the future.
REASON FOR BUYING STORE BRANDS
Source: Nielsen Shopper Trends 2013 (Base: All store brand buyers n=975)
10 IRELAND PRIVATE LABEL REPORT
SO CAN MAINSTREAM BRANDS REALLY COMPETE…Market analysis in the past suggests that there is no single response
strategy for manufacturers competing against store brands. Indeed,
what works for one brand/category may not work for another. There
has been somewhat of a surrendering or ‘laissez faire’ attitude to
store brands in certain categories in recent years, an attitude that ‘we
can’t possibly compete so leave them to it’. However, not competing
against store brands means lost opportunity, as you lose customers
without fighting for them. Manufacturers
need to actively compete against store
brands in the same way they would against
any other growing brand. It does not
have to mean more promotions, lower
margins and less bargaining power with
retailers. However, to compete effectively
and efficiently at all requires a detailed
knowledge of your brand and category. It is
key to understand your brand positioning,
who you are what and you stand for,
consumer decision tree flow, category
dynamics, competitive positioning and any
contextual global or local trends.
One option to competing with store brands is to actually manufacture
the store brand products yourself. Work in partnership with the
retailer to drive the category through both store brand and branded
offerings ensuring that consumer needs are met. Remember that
store brands are also a challenge for retailers as they need to manage
it profitably. Manufacturing store brands can offer you a way to drive
volumes resulting in economies of scale for your overall business.
Many manufacturing companies have gone down this road and
enjoyed lucrative partnerships with the retailers.
MANUFACTURING STORE
BRANDS CAN OFFER
YOU A WAY TO DRIVE
VOLUMES RESULTING IN
ECONOMIES OF SCALE
FOR YOUR OVERALL
BUSINESS.
11Copyright © 2013 The Nielsen Company
For some, manufacturing store brands is not an option, or it does
not fit with the company strategy, so there are alternative ways to
compete. Aside from promotions, there is focus on strong brands
and their emotional appeal to consumers, innovation to break their
shopping habits, and fulfilling consumer needs. Some retailers know
their shoppers better than manufacturers with the bank of data they
collect through loyalty cards–make sure you are at the top of your
game to compete effectively. While price is still a store brand lever
do not resort to using price solely as a defence/competitive strategy.
Short term price down activity can improve short term performance,
however cumulated short term price downs become long term and
this can damage brand equity. In fact some recent pricing studies
have actually shown surprisingly low price relationship between store
brands and mainstream brands, so consumers may not be referencing
as much as you think. Manufacturer brands need to re-engage with
all core levers to drive brand loyalty. Increasing brand loyalty will help
safeguard your business for the future.
Building this loyalty however is the difficult part. Brand trust is
eroding over time and with market choice and category ranges ever-
increasing, it is becoming more and more difficult to cut through and
get your message across to the shopper. The time has come when the
shopper is in complete control and brands need to be ‘everywhere’.
Mass communication has made it increasingly difficult to cut through
to the consumers.
While some brands are using the strategy of targeting customers
only at point of purchase, using only this strategy alone can be a
risky strategy for certain other categories. For example it is key to
understand where the consumer ‘engages’ with your category. For
example brand choice in ketchup is influenced pre-store; whether
this be habitual choice, advertising, family preference or buzz, the
key for this category would be to focus activity in these areas or miss
the point of decision making. For a category like toilet tissue there
is much stronger in-store index so there is an opportunity for your
brand to activate consumers through in-store influences–promotions,
price, merchandising, packaging etc. Similarly if consumers shop your
category on auto pilot, you could be investing significant sums of
money on in-store activity, only for it to be ‘missed’ by consumers⁶.
In store battling for impact on shelf has become more and more
difficult as the shelves become more and more cluttered with
products. If consumers are not engaged with your brand then store
brands have a greater opportunity to win at the point of purchase
where functionality and price will win out.
Also, consider the growth of on-line shopping where the consumer
does not even get to the store. While on-line shopping in Ireland
is still very small it has advanced so much in the UK that Tesco are
opening ‘dark stores’ to supply the online shopping population–how
do you compete for ‘online shelf space’?
12 IRELAND PRIVATE LABEL REPORT
In addition it is also key to understand your price and promotional
elasticity and also elasticity relative to your competitors. This can
help you to decide on the best strategy forward to win. For brands
that are relatively price inelastic and in possession of more than
the fair-share of their category, the private label threat is more
easily countered by investing in marketing. For brands that are
relatively more price elastic, and whose volumes are sensitive to
promotional activity, promotional activity should be reviewed and
the most effective promotions should be used sparingly (Source:
Nielsen Analytic Consulting). It is clear therefore, that blending
a ‘bigger picture’ view of category dynamics from a country and
channel (such as hard discount development) perspective with a
more minute view of brands within a category, is the way forward.
Looking at the key drivers of some of the winning brands of 2012
the levers used included innovation to target different consumer
needs, focus on health, focus on value and different consumption
occasions serving a specific need such as big nights in,
pre-planned ‘impulse’ purchase and making lunch to take to work.
For almost all, they used the strength of long term umbrella brand
advertising emphasizing quality and appeal of the brand, and the
brand message was conveyed in a simple, convincing manner
with a functional benefit that solved a consumer need. In addition
most had quite distinctive packaging. Almost all were something
‘different’ which were used to disrupt consumers usual shopping
behaviour and to encourage trial. (e.g. Millicano, Cully & Sully,
Persil Concentrate, Oral B).
In addition it will become more important for brands to be more
socially responsible. This strategy may not necessarily be a big
driver of sales peaks but it is about ‘doing what is right’ from the
point of view of the health and future of the population and the
planet. One trend that will remain at the forefront of consumers
mind is health. Obesity levels continue to rise to shocking levels
particularly in children and the subsequent health problems
that this will bring means that there is a responsibility on the
food manufacturers to work on addressing this by reducing salt
content, saturated fat content and portion sizes for example.
There has already been a lot of work done in this area and it will
continue to be a focus and an opportunity going into the future.
Additionally the area of fair trade, carbon footprint and reducing
packaging have also become very important–saving our planet
for the future generations offers brands another opportunity to
engage with consumers from an emotional and responsibility
point of view. Many key brands are already on this journey such
as Lyons tea, Cadbury, Nestlé and Mars chocolate, Nescafé and
Pampers but to name a few. This can be a costly strategy but pays
out in the long term.
13Copyright © 2013 The Nielsen Company
SO WHAT DOES THE FUTURE HOLD FOR PRIVATE LABEL …There is no question that private label will continue to grow in the
future and any worries about the economy will only strengthen this
further. Chart 4 illustrates how consumers say that they plan to buy
even more store branded items in certain categories where they have
already bought into the range.
Looking at the UK, which is arguably one of the most advanced
private label markets in the world at 35% share, it highlights the
potential size private label could achieve with full support and time.
Consumer behaviours have changed irreversibly and they are setting
the agenda. Retailers will continue to drive premium store brand
ranges as this is the area where they can achieve real margins. Brands
need to ensure that they keep relevant, and more importantly, drive
customer loyalty to ensure the repeat purchase, otherwise their future
is at risk. Consumers expect better prices as standard so the winners
will engage with them on other levels. The occasional store brand
purchaser of today could be the regular purchaser of tomorrow if this
pattern is not disrupted.
14 IRELAND PRIVATE LABEL REPORT
Source: Nielsen Shopper Trends 2013 (Base: All store brand buyers n=975)
60% 38% 40%
66%
54%
44%
62% 56%
57% 59% 63%
69% 67%
40%
25% 42%
29%
34% 49%
31% 31%
37% 32% 33%
35%
28% 26% 29%
38%
18% 6%
12% 8% 7% 12%
6% 9% 4% 5%
3% 5% 4%
OTHERS BABY FOOD ALCOHOLIC BEVERAGES
STORE BRANDED MEDICATIONS
PREPARED MEALS NON-ALCOHOLIC BEVERAGES
PET FOOD CARBONATED SOFT DRINKS
SNACKS &CONFECTIONARY
PERSONAL CARE CANNED & PACKAGE GROCERIES
FROZEN & CHILLED FOODS
STAPLE FOODS DAIRY PRODUCTS HOUSEHOLD PRODUCTS, LIKE CLEANERS
PAPER PRODUCTS
62%
35%
3%
68%
59%
INTENTION TO PURCHASE STORE BRANDS BOUGHT IN PREV. 12 MTH
Buying more PL products than 12 month ago
Buying less PL prducts than 12 month ago
Buying about the same number of PL products
ABOUT NIELSEN
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and
measurement company with leading market positions in marketing
and consumer information, television and other media measurement,
online intelligence, mobile measurement, trade shows and related
properties. Nielsen has a presence in approximately 100 countries,
with headquarters in New York, USA and Diemen, the Netherlands.
For more information, visit www.nielsen.com.
Copyright © 2013 The Nielsen Company. All rights reserved. Nielsen
and the Nielsen logo are trademarks or registered trademarks of
CZT/ACN Trademarks, L.L.C. Other product and service names are
trademarks or registered trademarks of their respective companies.
13/6085
Article by Elaine Wade,
Business Unit Director,
Nielsen Ireland
Any queries on above article,
please contact [email protected]
Sources:
¹ Nielsen Global Consumer Confidence Survey Q4 2012
² Nielsen Strategic Planner Dec 2012, Total Available Coverage
³ Nielsen ShopperTrends 2013
⁴ Nielsen Scantrack to December 2012
⁵ Nielsen Media AdDynamix data 2013
⁶ Nielsen Shopper Modality Ireland, 2010