Ongoing shifts in retail patterns naturally affect the way brand managers fulfill their label and packaging needs. One of the more notable of trends concerns the labeling of products manufactured or processed specifically as own label brands (private label in another hemisphere) for supermarkets and other retail groups. These brands now account for a growing and significant volume of the total self-adhesive consumption in most developed countries. Much of this stems from improvements to the quality, marketing and packaging of own label products, resulting in greater consumer acceptance of many ranges. Supermarkets’ versions of established brands are therefore no longer perceived as being downmarket. The added bonus for retailers is that they offer the prospect of higher margins, or at least certain goods can be sold as loss leaders to attract customers. Naturally this has tended to boost the bottom line of the major supermarket groups and by extension aid their unstoppable expansion.
Some idea of the size of the own label food and grocery sector in Europe comes from IGD, an international food and grocery consultancy in the UK. Based on 2005 figures, it estimates these products will account for more than a quarter of the market (26.8 percent) across Europe within four years. By 2010, Europeans will be spending around €430 billion ($539 billion) on supermarkets’ own brands, up 45 percent from €298 billion ($373.6 billion).
In the UK own brands already account for £2 of every £5 spent in supermarkets and other stores. In other words, some 40 percent of the total spend goes on own brands, compared with the European average of about 27 percent. The UK market for own brands is worth €72.1 billion ($90.3 billion), with Germany following at €63.6 billion ($79.7 billion), a market penetration of 35 percent, while the corresponding figures for France are €59 billion ($73.9 billion) and 26 percent.
“The UK currently leads the way in terms of food and grocery own label,” says Jonathan Gunz, senior international business analyst, IGD. “The future growth in Europe will come from Russia and the rest of Eastern and Central Europe, where penetration levels are currently fairly low despite a relatively large grocery market. Shoppers in Western Europe have seen for themselves how retailers’ own brands are taking up more and more shelf space. Categories like healthy eating, premium, value, organic, and lifestyle have helped retailers’ own brands become much stronger. The same is likely to happen in the emerging markets of Europe and beyond.”
IGD expects retailers to continue to diversify their own label proposition into categories beyond conventional food and grocery products. In fact, most large retail chains are already involved in selling items like financial services, electrical goods and communication technology as they respond to customers’ needs and new opportunities.