Across Europe – and in the US – private-label prices are, generally, continuing to rise. Consumers have yet to baulk at the increases. However, as IRI’s Tim Eales notes, as the price gap with brands narrows, retailers must work harder to convince consumers of their own-label proposition.
Private-label food prices keep rising across Europe, except in Greece, but shoppers are not – yet – reacting negatively.
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During the third quarter of 2013, the price of retailers’ own brands rose in every European country surveyed except Greece, according to the latest international food basket barometer provided exclusively for just-food by IRI.
Retailers are attempting to claw back lost margin and have so far avoided any shopper backlash as private-label prices steadily creep up.
For now at least, European consumers remain pleased with the value savings they still enjoy when they compare the prices with those of national brands. They know they are still saving money on their total weekly shopping basket.
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The latest just-food international basket data reveals the biggest average private-label food price hikes in quarter three were in Germany (+7.2%), the Netherlands (+5.7%) and the UK (+4.4%). In Greece they were down 1.9%. At the same time national brand average prices rose by 2.5% in Germany and by 1% in the Netherlands. Shoppers in the UK were paying more for national brands, too, with average prices up by 4.8%.
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By GlobalDataIRI’s latest report Private Label – Balancing Quality and Value published this month confirms how retailers and national brand manufacturers face an ongoing dilemma. They must continue to offer shoppers value in tough times but at the same time try to retain and reclaim lost margin. For retailers, rising private-label prices is a sensible strategy.
The report reveals across Europe prices have narrowed more slowly in food and beverages than in non-food. Across both sectors a private-label product was on average 29.9% cheaper than a similar national brand with the price gap widest in France and Germany and narrowest in the Netherlands, UK and Italy.
There has also been a drop in the percentage of private-label promotions while deals for national brands continue to rise, which is narrowing the food price gap. This is likely to continue into 2014 and the trade must wait to see how shoppers react.
One of the reasons consumers are tolerating private-label price rises is that many of the more expensive items are launches at the premium end. Shoppers of premium private label are tempted by new products and better quality. The most hard-pressed shoppers continue to choose lower-tier, value, private-label foods.
The result of all the trends outlined in the report is private label’s share of food categories grew in most European countries. The exception was France where aggressive price and promotions by national brands took effect in a bid to win more of shoppers’ limited budgets. Private label particularly drove value sales in Spain, Italy and Greece where deflationary worries remain.
Across Europe, private label still has a relatively low presence in the alcohol, personal care and confectionery categories.
For most consumers their shopping basket will always be a mix of own label and national brands. As the price gap continues to narrow with the move to more quality private-label items, food retailers and manufacturers must work harder than ever to tell a compelling and shopper-focused story. Sharing category-level insight and engaging in localised assortment optimisation will maximise sales for entire ranges.
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