Private Label Shopping Trends in Food and Non-Alcoholic Beverages

Private Label Shopping Trends in Food and Non-Alcoholic Beverages

Introduction

When Datamonitor surveyed consumers across 15 countries about to what extent they agreed they had been "making an effort to save more money," there was an overwhelming degree of agreement across geographies. In times of economic uncertainly, consumers become even more interested in obtaining value-for-money in their everyday shopping and private label is an important way of achieving this.

Scope

*Insightful analysis into consumer's attitudes, beliefs and motivations behind private label versus famous brand purchases

*Consumer survey insight covering 15 countries. Examines attitudes to brand image, price/value and food and non-alcoholic beverage products more generally

*Detailed action points offering practical strategies for private label and famous brands based on the trends and insights analyzed in the report

*Covers food and non-alcoholic beverages. Geographic coverage includes Europe, the US, Asia Pacific and the BRIC markets

Highlights

The adoption of a 'recessionary mindset' is already changing consumer attitudes and behaviors with regards to overall spending and their actual product choices. Any worries that consumers have about the economy only serve to strengthen private label spend because store brands are seen as an important way of achieving value for money

Private label food penetration accounts for a disproportionately high percentage of the overall private label FMCG market in most countries. Private label non-alcoholic beverage penetration accounts for a disproportionately high percentage of the overall private label market in some European countries, but the opposite is true across Asia

Marketing fatigue potentially enhances the appeal and relevance of private label brands, especially as advertising is a key defense tactic for famous brands. Across the 15 countries surveyed by Datamonitor in August 2008, 47% of respondents 'strongly agreed' with the statement, "there is too much advertising today."

Reasons to Purchase

*Improve your decision making: use this report to help understand what you should be doing to embrace private label growth or defend yourself from

*Market sizing: understand the scale and growth of the private label food and non-alcoholic beverage opportunity/threat by sector and country

*Access insightful market and consumer opinion data aggregating the most compelling research in this timely and important opportunity/threat

Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Table of tables 4
THE FUTURE DECODED 5
INTRODUCTION: Private label is entering an important era as value conscious shoppers look to maximize their discretionary spending 5
With global private label sales approaching one trillion dollars, growth can be attributed to both 'consumer pull' and 'manufacturer push' 6
TREND: Growth in private label penetration and sales is apparent across the globe 12
The propensity to opt for private label is increasing across all FMCG categories and most geographies 13
Private label is accounting for an increasing amount of food spend across most countries 16
Consumption of non-alcoholic beverage private label brands is typically lower than food in most countries 19
Key takeouts and implications: the presence of private labels is increasing, and is becoming a significant threat to producers' brands and manufacturers' profitability 23
INSIGHT: Price-led value has a significant influence on consumers' food and beverage choices at a time when commodity prices have soared 24
Trends in commodity prices have intensified the search for products perceived as better value 24
The search for value is increasingly dictating where consumers purchase food and beverage products 26
Price/value is a key influencer of food and beverage choices and this bodes well for additional private label growth in the sectors going forward 27
Brand name/brand image is a secondary consideration to most food and beverage decisions 28
Key takeouts and implications: private label appeals to the growing number of food and beverage consumers looking to stretch their budgets and will further challenge brand loyalties going forward 34
INSIGHT: Increasing economic uncertainty enhances the appeal of private label food and non-alcoholic beverages 35
Private label offers consumers discernible price savings which they typically recognize 35
Achieving cost savings is the key driver influencing a switch towards private label alternatives because consumers instinctively recognize the superior value such products offer 36
Historical downturns, especially in the 1970s, have been major catalysts for private label adoption and development 37
As consumers adopt a 'recessionary mindset', the search for price-led value in food and beverage purchases will intensify 38
More consumers have made food and beverage purchases on the basis of value in 2008 41
But a desire and tendency to gravitate towards higher quality food and beverages is still a prominent trend characterizing many food and beverage choices 43
The current economic downturn has contributed to consumers switching to discount stores and private label alternatives more often in 2008 45
Key takeouts and implications: private label appeals to the growing number of global consumers who are finding ways to stretch their budgets 47
INSIGHT: Private label choice is expanding and is more sophisticated than ever, especially in food and non-alcoholic beverages 48
Private labels are increasingly 'tiered' to accommodate all levels of consumers' budgets and the core consumer trends driving shopper behavior 48
Premium and indulgence trends are signifying a new direction for private label adoption and innovation 51
The desire for 'everyday value', including attentiveness to rising food costs, has created a demand for discount private label food and beverage brands 53
Health and wellness trends have a huge influence on consumer lifestyles and food and beverage choices 54
Organic and ethical private label ranges will appeal to a large proportion of food and beverage shoppers 56
Private label saturation could however lead to time poor consumers returning to famous brands 58
Key takeouts and implications: private label has grown because it is increasingly 'on-trend' and industry players have been adept at aligning it with relevant consumer segments 61
INSIGHT: Consumers' trust in private labels is growing, which boosts propensity to trial and longer term adoption 62
The majority of consumers, particularly in western markets, consider private labels to be of good quality, believing that the differences between own label and famous brands are minimal 64
Private label preference and adoption doesn't necessarily translate into increased store loyalty 68
The quality that national brands offer is highly recognized by consumers in some product categories 69
In-store environment also influences private label and national brand perceptions 70
Marketing fatigue also enhances the appeal and relevance of private label brands 71
Private label still typically attracts more lower income shoppers but the consumer base is broadening 73
Key takeouts and implications: private label is not a new phenomenon but consumer acceptance is growing across socio-demographic groups 78
ACTION POINTS 79
ACTION: Determine whether you want to manufacture private label brands or not 79
ACTION: Ensure that private label offerings are 'on-trend', deliver added value benefits for more discerning shoppers and receive additional backing during the economic downturn 81
Use the recessionary climate as an opportunity to grow private label share 81
Create and maintain a competitive advantage by reassessing strategic aims for future growth 85
Keep private label brands fresh with new variants that utilize more subtle and distinctive branding techniques 88
Be wary of creating choice proliferation through over-extended private label initiatives 89
Be sensitive to the international differences in attitudes towards private label products 89
Focus on building effective relationships with private label partners 90
Retailers must ensure that the relative mix of value and premium private label lines is consistent with store positioning 91
ACTION: Manufacturer brands must maintain marketing investment to minimize deflection to private label alternatives 92
Highlight the risk of switching to a cheaper non-branded alternative 94
Re-assess the need to rationalize brands and convince retail partners that those brands are in line with their broader positioning 94
Focus on quality to maintain differentiation and prove to consumers that quality really matters 94
Develop more custom/personalized solutions for consumers to offer unique, targeted benefits 96
Develop communications which convince consumers that national branded products still represent good value for money 97
Consider developing a 'flanker' value sub-brand while ensuring there is an offering for all pricing tiers 99
Consider if brand related stores can help enhance brand prestige and loyalty 100
APPENDIX 101
Definitions 101
Methodology 101
Further reading and references 102
Ask the analyst 105
Datamonitor consulting 105
Disclaimer 105
List of Tables
Table 1: Total private label penetration and spend (US$ millions) in Europe, Asia Pacific and the US, by country, 2002-2012 15
Table 2: Total private label food penetration and spend ($ millions) in Europe and the US, by country, 2002-2012 18
Table 3: Total private label food penetration and spend (US$ millions) in Asia Pacific, by country, 2002-2012 19
Table 4: Total private label non-alcoholic beverages penetration and spend (US$ millions) in Europe and the US, by country, 2002-2012 21
Table 5: Total private label non-alcoholic beverages penetration and spend (US$ millions) in Asia-Pacific, by country, 2002-2012 22
Table 6: The FAO Food Price Index (FFPI), 2000-2008 25
Table 7: Consumer survey: the importance attached to "being seen with the right brand" in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 29
Table 8: Consumer survey: the influence of price, habit/preferred brand, and brand image on food and non alcoholic beverage product choices in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 31
Table 9: Consumer survey: the influence of price on food and beverage product choices in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 32
Table 10: Consumer survey: the influence of brand name/brand image on food and beverage product choices in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 33
Table 11: Consumer survey: the propensity to make efforts to save more money in light of the economic downturn in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 39
Table 12: Consumer survey: the propensity to choose food and beverage products on the basis of value/cost in the previous six months, in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 42
Table 13: Consumer survey: the propensity to choose higher quality food and beverages in the previous six months in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 44
Table 14: Consumer survey: the importance attached to diet and nutrition in creating a felling of wellbeing in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 55
Table 15: Consumer survey: the influence of health on food and beverage product choices in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 55
Table 16: Consumer survey: the influence of production methods on food and beverage product choices, in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 57
Table 17: Consumer survey: the influence of ethics or sustainability benefits on food and beverage product choices, in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 58
Table 18: Consumer survey: agreement with the statement "there is too much choice when doing grocery shopping", in 15 countries across Europe, Asia Pacific, South America and the US, by country 59
Table 19: Consumer survey: agreement with the statement "there is too much choice when doing grocery shopping" in 15 countries across Europe, Asia Pacific, South America and the US, by country 72
Table 20: Consumer survey: the influence of price on food and non-alcoholic beverage choices in 15 countries across Europe, Asia Pacific, South America and the US, by country and gender, 2008 76
Table 21: Consumer survey: the influence of brand image on food and non-alcoholic beverage choices in 15 countries across Europe, Asia Pacific, South America and the US, by country and gender, 2008 77
List of Figures
Figure 1: The private label market is impacted by a broad range of drivers and inhibitors, a message for retailer and manufacturer brands alike 7
Figure 2: Overall private label penetration across FMCG categories is higher in Europe and the US than it is in Asia Pacific 16
Figure 3: Private label food penetration accounts for a disproportionately high percentage of the overall private label market in most countries 17
Figure 4: Private label non-alcoholic beverage penetration accounts for a disproportionately high percentage of the overall private label market in some European countries, but the opposite is true across the Asia Pacific region 23
Figure 5: The Food and Agricultural Organization of the United Nations Food Price Index (FFPI) scaled new heights in 2008 25
Figure 6: Good value for money has become the most important influence over grocery store choice globally 27
Figure 7: Price is second only to sensory benefits in influencing consumers' food and beverage choices 28
Figure 8: Consumers generally state that they are not overly pre-occupied with brand image 29
Figure 9: French, US and Brazilian consumers are the most price conscious food and beverage consumers 32
Figure 10: Emerging market consumers are more brand conscious when it comes to food & beverage choices 33
Figure 11: Perceived and experienced value benefits leads to private label trial and long term adoption 36
Figure 12: Shoppers have come to recognize the 'value for money' that own label brands offer 37
Figure 13: Consumers are making efforts to save in light of the current downturn 39
Figure 14: Consumers are feeling the effects of the downturn on their personal finances 40
Figure 15: Half of lower income shoppers are having difficulty buying the groceries they need 41
Figure 16: There has been a shift towards value based food and beverage shopping in 2008 43
Figure 17: Consumers have continued to purchase higher quality food and beverages with greater regularity in 2008 as a trend of 'hi-lo consumerism' continues to shape broader buying behavior 45
Figure 18: The nature of the private label offering has changed considerably 50
Figure 19: Private label brands are experiencing growth, with four distinct benefits/attributes 51
Figure 20: Premium private label products exude indulgence with descriptive names and upscale packaging 52
Figure 21: Enjoying small indulgences to escape everyday pressures has remained a theme in global consumer behavior in 2008 in spite of the economic downturn 53
Figure 22: In Australia and the UK, the discount brands associated with major retailers often have notable shelf standout owing to the simplistic nature of the pack design 54
Figure 23: Health considerations have a significant amount of influence on food and beverage choices made by consumers across the globe 56
Figure 24: A large proportion of consumers already feels there is too much choice when doing grocery shopping which means the private label range expansion must be managed carefully 60
Figure 25: Globally, consumers are familiar with private label and this better enables them to make a brand versus private label decision 63
Figure 26: Perceptions of private label are changing across the majority of FMCG categories 64
Figure 27: Private label brands are no longer perceived as merely low cost alternatives to famous brands 67
Figure 28: Global consumer attitudes towards private label are typically favorable 68
Figure 29: For some categories, private label is not deemed as a credible alternative to famous brands 70
Figure 30: Japanese consumers show the least amount of advertising fatigue but more than 40% of consumers overall believe there is "too much advertising today" 72
Figure 31: Consumers think that a significant chunk of the higher price associated with famous brands does not bring them tangible benefits 73
Figure 32: More US consumers currently report buying private label products 75
Figure 33: There is little variation in the influence that price has on food and beverage choices by age 76
Figure 34: Young Adults and Mid-lifers place the most importance on brand image when choosing food and non-alcoholic beverage products 77
Figure 35: National brand players are faced with a dilemma over whether to produce private brands or not 80
Figure 36: Investment in marketing is important in effectively capitalizing on the recessionary climate as an opportunity to grow private label share 85
Figure 37: Industry players must determine the strategic approach taken to manage private label development 86
Figure 38: Private label players adopt different approaches to branding depending on whether the strategy is geared towards differentiation or low pricing 87
Figure 39: Fostering effective supplier relationships is crucial to the longer term growth prospects of private label branding 91
Figure 40: Enhance the full scope of the consumer experience by strengthening overall retailer positioning 92
Figure 41: Manufacturers looking to capitalize of premiumization in personal care must excel more than their competitors in the provision of factors associated with the PPI 96
Figure 42: Four key personal benefits as well as the additional ease of customizing have driven the trend toward more personalized CPG 97
Figure 43: Charmin Basic, an example of a famous brand adopting the tiered pricing strategy of many private labels, and the possible private label response 100