In this recessionary climate the gains that retailers are making with their own brands – as highlighted by SymphonyIRI’s latest special report on private-label growth in Europe - may come as no surprise to food manufacturers.

Across Europe supermarkets have always put a high priority on their own brands as a source of higher margins. In the UK Tesco and Sainsbury's recently claimed their own-label ranges were bolstering performance. Like many other retailers, they have been investing in the quality and variety of their own brands, giving them more prominence in-store and spending more on marketing to reiterate to price sensitive shoppers that buying private label doesn't mean compromising on quality. 

In some countries retailers are playing to consumers' desires to shop more responsibly. Ahold's Albert Heijn in the Netherlands, with its environmentally friendly Pure & Honest range, and Sainbury’s in the UK with its allergy sensitive Freefrom range of products, are examples. Mercadona in Spain and Asda in the UK are focused on every day low pricing to give shoppers the value they want in tough times. 

Across Europe, private-label gives shoppers an average 30% saving on an equivalent national brand helping them to gain 0.5 percentage points in share over the last year. They now have 35.6%, in value, of Europe’s FMCG market. 

While food has seen a healthy 4.3% increase in value sales over the last year, compared to the 2.4% increase in non-food value sales, the vast majority of the growth in food is being driven by retailer’s own brands. In fact, private label drives nearly all of the growth for total FMCG sales in every country except Germany.

That said, while retailers are still driving most of the share gains, food manufacturers are holding their own, pressing on every aspect of the marketing mix to optimise their offer to the consumer and drive share. Internet shopping has also provided brands with a platform for growth. At its simplest the shelves are longer and the ability to maintain availability easier online. 

Food brands have also spent more time assessing the competitive risks, developing and adjusting their portfolios and reviewing their approach to individual retail chains. Their attitude to private label has changed now that it is clear that retailers are no longer serving just the value end of the market. 

Weaker mid-tier national food brands have the most to lose as retailers, boosted by their success, continue to rationalise their ranges down to the top brands.  

Shoppers though are in the controlling seat of all this change. They still want to buy their favourite brands; trusting the perceived and real benefits (or taste) of some products more than others. In niche categories such as ketchup many consumers will never compromise. Heinz for example has an estimated 60% share of the ketchup market in the US and 78% in the UK. 

Despite the progress being made by smart retailers, national brands are still influential in many categories. They often act as category sponsors and ‘signposts’ to tempt shoppers.  Promotions to reignite brand loyalty will tempt consumers back to manufacturers’ brands but price rises cannot be avoided if raw material costs, particularly in food, keep moving up.

Ultimately private label and national brands need to co-exist. Growth can only come if manufacturers have a deep understanding of what makes shoppers tick and are brave about innovation. Food manufacturers should review their brand propositions for saliency and value and find operational efficiencies through pricing and promotional optimisation or leveraging multichannel opportunities to engage with shoppers in a meaningful and relevant way if they are to drive growth in this new era.