Average basket cost is on the rise

Average basket cost is on the rise

The gap is closing between own label and brands. The latest quarterly basket data for just-food.com shows own label is becoming more expensive – a trend most likely down to the level of deals that are happening on brands.

The cost of an average basket of food is going up and on average, retailers' own-label products are also going up, while the price of national brands are not increasing as fast and in some cases are coming down. 

In the UK, for example, when we look at the average price of a basket of retailers' own brand in the first quarter of 2014, we can see an increase of 3.3% from 2013. A basket of national brands increased by 2.9% - and this pattern is is something that is seen across most markets. In Spain, retailers' own brand increased in price by 2.9% while national brands fell 1.9%.

The trend is also reflected in the relative price index, which indicates the price of own label relative to branded products. The gap is clearly eroding, with the UK market seeing its index increasing from 71.7 in the first quarter of 2013 to 72.4 in the first three months of this year; in the other words, the price gap has reduced. This is reflected throughout most of the other countries, the only exceptions being the US and the Netherlands.

In a major consumer recession like the one we've experienced in recent years, where we all have relatively less money to spend, you would naturally expect shoppers to look for lower priced options to buy. Typically, we would see in these circumstances retailers' own label at 30-40% less than most brands. But it seems that retailers are allowing this price gap to close. 

Own-label products are going up in price and at the same time the amount of promotional activity is often being reduced on these products, or not increasing as quickly as it is for brands. This is a trend we are also seeing as part of our Price and Promotion in Europe special report, due to be published by IRI later this year.

Overall we see that the percentage volume of product sold on promotion is increasing year on year. So as retailers are sometimes decreasing the amount of deals on own label, the percentage volume sold on deal is actually increasing, as the national brands increase promotional activity – although the basket data shows this does not curtail the overall increase in the price of an average basket for food in all countries bar Greece. 

This increase in the volume of product sold on promotion is pretty much across the board, interestingly apart from the UK market and France. The proportion of volume on deal in the UK, always much higher than other markets, has reduced again, the first time we have ever seen it going quarter after quarter, signalling the fact the trade promotion has become far too expensive for most manufacturers to maintain at the level it has been.