The last quarter’s just-food international basket, compiled exclusively by IRI, highlights a continued rise in the price of private-label products in each of the eight countries monitored by the data. At the same time, the price of national food brands is decreasing in those countries worse hit by the continued economic turbulence – namely Spain, Italy and Greece, where the presence of deflation underscores the seriousness of the austerity measures.
Demand for private label is higher than ever as retailers respond to the clear need for value that drives most shopping trips. They are certainly making hay while the sun shines, further closing the price gap between their own brands and those of national manufacturers.
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The price increases in private label are coming partially from the introduction of new premium ranges, where it’s easier to justify the increased cost. In some cases the cost of private label is equal to or even more expensive than national brands. Increasing prices at a time when most brands are working hard to provide cash strapped shoppers with extra value also signifies a confidence among retailers. They feel justified to push their prices up and close the gap even further with the price of national brands despite the economic pressures on shoppers, although they are also subject to the same cost pressures as national brands.
With more price points in private label to choose from, basic value ranges as well as premium options are able to grow. The mid-tier private label ranges are often victims of this growth and so we may see some more promotions here even though own label is usually promoted substantially less than national brands. This decline in promotional intensity is also fuelling price rises.
Over the last year many retailers have also revamped or relaunched their own products. Tesco in the UK for example introduced a new look for its Tesco Finest range, Ahold’s Albert Heijn in The Netherlands has revamped its Basic range. The UK has also seen Aldi create a range of gluten-free products, under the Has No’ brand.
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We will talk more about the private label trends across Europe in our next special report to be launched in October.
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By GlobalDataThe just-food basket also highlights the continuous struggle to sustain and grow volumes, which has forced many food manufacturers to accelerate promotions. However, in the UK, we are already seeing the tide on promotional intensity turning (from 54% of grocery volume sold on deal, to 52%) and now in Germany too (from 13% to less than 12%).
Manufacturers need to more clearly position their products alongside the new, often equally innovative private label ranges and highlight the product quality and value benefits to justify their price premium. Shoppers still want to buy brands but as the poor economic situation in many countries continues and a substantial price gap between private label and national brands exists their brand loyalties are more easily tested.
