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October 18, 2021

European private-label may benefit over branded as inflation bites – IRI

A leaning toward private label also appears to be emerging in Canada.

Private-label retail sales in Europe are likely to gain market share as manufacturers of branded food and drink products push up prices to combat inflation.

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The average UK consumer is experiencing a severe cost-of living crisis as inflation surges to a forty-year high and the price of goods continues to rise. This shock is the result of the sharply increasing costs of commodities, energy, and the ongoing conflict in Ukraine, and is threatening FMCG manufacturers, retailers, and foodservice operators’ ability to survive and grow. Inflation will have a profound effect on many consumer-facing industries in 2022 and beyond. Consult GlobalData’s new whitepaper, Inflation in the UK: The Impact of Historically High Inflation on the UK Consumer Landscape, to better understand shifts in consumer behavior and their impact on spending patterns, as well as the implications for UK businesses. This whitepaper covers:  
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  • Which industry sectors are most vulnerable to reduced consumer demand?
  • How is the government responding to high inflation?
  • How long will high inflation last in the UK?
  • How can your company survive and thrive in a high inflation environment?
Enter your details here to receive your free whitepaper and ready your business for these increasingly uncertain times.
by GD50 Custom
Enter your details here to receive your free Whitepaper.

Retailers may choose to hold back from increasing prices on select items to get an edge on branded products, which have been favoured during the pandemic as consumers sought “recognised and trusted brands in almost every FMCG category, despite retailer-owned private labels widening the price gap by offering discounts and promotions”, UK-based research and data company IRI said.

IRI’s ‘FMCG Demand Signals’ report published today (18 October) noted branded product sales rose 0.6% in the year ended 31 July, an increase of EUR35bn (US$40.5bn) in value terms. While the price gap between private label and branded products widened by almost one percentage point as retailers increased in-store and online promotions for own-label, the branded segment accounted for a 67.3% market share.

“In this growing inflationary environment, where leading FMCG manufacturers are likely to pass on the full impact of price increases to consumers, retailers are poised strategically to hold prices of private labels in categories where they wish to increase penetration and grow value sales,” IRI said.

It singled out chocolate, ambient foods, pre-packed meals, some better for you breakfast cereals, grain bars, “protein-rich functional foods and drinks”, at-home cooking sauces, condiments and meal kits as the most likely private-label items to be held in price.

Ananda Roy, IRI’s international senior vice president for strategic growth insights, said: “As inflationary measures hit parts of Europe and national brands raise their prices, retailers must decide exactly where they will allow price increases to flow directly through to consumers.

“Undoubtedly, we will see price hikes for many staple national brands. In categories where major supermarkets and discounters wish to see greater private-label penetration, they may decide to hold back and offer more affordable prices.”

Roy added the scenario is likely to continue for “at least a quarter or more to gain penetration and value sales growth”.

In the year through July, IRI said total FMCG sales in Europe rose 3.1% to EUR579bn, with chilled, fresh and ambient foods accounting for 51.3% of sales.

Frozen foods were the second-fastest growing category along with drinks, with total sales up 4.4%, led by fish and meat, and ice cream.

IRI concluded. “As the prices of national brands, particularly in food, rise in response to the inflationary trend, it remains to be seen if private labels can gain greater share of value sales especially as retailers may decide strategically to pass on cost increases in certain categories and eat into their margins in strategically important categories to their private-label portfolio.”

In Canada, a preference for private-label food products seems to be increasing. A survey by Caddle Inc. in Ontario found 39.8% of Canadian shoppers were leaning toward own-label, split into 17.5% buying much more and 22.3% purchasing a little more. Some 52% of respondents, however, said their shopping habits were unchanged, with 8.2% cutting private-label purchases to some degree.

 

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Free Whitepaper
img

What is the impact of historically high inflation on the UK consumer landscape?

The average UK consumer is experiencing a severe cost-of living crisis as inflation surges to a forty-year high and the price of goods continues to rise. This shock is the result of the sharply increasing costs of commodities, energy, and the ongoing conflict in Ukraine, and is threatening FMCG manufacturers, retailers, and foodservice operators’ ability to survive and grow. Inflation will have a profound effect on many consumer-facing industries in 2022 and beyond. Consult GlobalData’s new whitepaper, Inflation in the UK: The Impact of Historically High Inflation on the UK Consumer Landscape, to better understand shifts in consumer behavior and their impact on spending patterns, as well as the implications for UK businesses. This whitepaper covers:  
  • Why has global inflation returned with a vengeance?
  • What is the current inflation situation in the UK?
  • What impact is inflation having on UK retail sales?
  • What tactics are businesses relying on to tackle the effects of high inflation?
  • How are consumers changing their behaviors to cope with the higher cost of living?
  • Which industry sectors are most vulnerable to reduced consumer demand?
  • How is the government responding to high inflation?
  • How long will high inflation last in the UK?
  • How can your company survive and thrive in a high inflation environment?
Enter your details here to receive your free whitepaper and ready your business for these increasingly uncertain times.
by GD50 Custom
Enter your details here to receive your free Whitepaper.

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