Private label – retailers’ alternatives to brands – tend to benefit from inflation. However, despite record inflation in France, Germany and the UK, the market share of private label in the three countries remained broadly stable across FMCGs in 2022. This is changing in 2023. This briefing analyses the reasons for the lukewarm performance of private label in 2022, how 2023 is different, and outlines key steps to capitalise on the positive tailwinds to win in private label going forward.
This report comes in PPT.
High and sustained inflation spilling into 2023 has shifted habits, and private label is expected to perform better than it has previously. To benefit fully, private label needs to harness its price advantage in economy and basic ranges. Retailers can introduce, or reorganise their lowest tier ranges under one umbrella label, with a simple but unified logo, easily identifiable in stores and online, clearly highlighting the price reductions to attract consumers seeking to limit spending.
At the premium end, private label can compete with brands on quality, with dedicated ranges. Organic, all-natural and sustainable products are still in demand, but willingness to pay more for such products is in decline – this is an opportunity for private label to offer high-quality products with in-demand attributes at lower prices than brands. Discounters stand to benefit the most from consumers viewing private label as good quality. This can be achieved through advertising, targeting Gen Z to renew the customer base, design-led store refurbishments and expansion of bricks-and-mortar stores into affluent areas.
E-commerce needs to be a focus if private label is to gain share. Discounters are far behind established supermarkets/hypermarkets and face an uphill struggle in France and the UK, where the e-commerce landscape and online shopping habits are well developed. They should offer click-and-collect in France, and partner with delivery apps such as Deliveroo or Uber Eats in the UK to reach urban populations who favour home delivery. In comparison, the German online eco-system is smaller and is still led by Amazon. Grocery retailers can do more to lead the way there, expanding both click-and-collect and direct delivery.
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