Jon Wright, head of European Insight at IGD, examines where the opportunities are private label, as the COVID-19 crisis starts to dissipate. This article first appeared in ESM Issue 3 2021.
The full economic impact of the pandemic has yet to be felt across Europe, with some immediate changes in the short term. As governments reduce or remove economic support, employment levels are likely to become significantly more challenging.
However, in some countries, such as the UK, the recovery has started slightly quicker than expected, bringing hope that economic output could return to pre-crisis levels sooner than worst-case scenarios predicted. These emerging circumstances do, however, suggest that the recovery from COVID-19 will not benefit everyone equally.
Some will begin to see and feel an increase in prosperity (on the upward part of the so-called ‘K-shaped recovery’), while others will get left behind or stay the same (on the downward part of the K).
Improving Perceptions Of Private Label
For retailers and private-label suppliers, in the short term, this dichotomy creates both challenges and opportunities, which are likely to evolve country by country, as shoppers adapt to their individual conditions. Whilst it will mean spreading investment across private-label tiers, from both innovation and marketing points of view, the opportunity to build long-term loyalty with shoppers by meeting their product and affordability needs is likely to grow.
IGD’s ShopperVista data shows how shoppers’ perception of private-label products has risen in Great Britain during the last year.* In the third quarter of 2020, 71% of shoppers said that they were ‘very satisfied with the quality of private-label products’, with 66% stating that they ‘trust private-label products as much as brands’.
There is clearly an opportunity for retailers: 43% of shoppers agreed that ‘most of the food and grocery products I buy are own-label products’ – a figure that has risen by 2% since the beginning of 2020.
One-Stop Shopping
The trend towards fewer, larger shops during the pandemic reversed the fragmentation of shoppers’ spending patterns, which had been increasing prior to COVID-19’s arrival.
Interestingly, from a private-label perspective, shoppers’ concentration of spending at fewer retailers or channels has not benefitted all categories equally. The PLMA’s recently published data for Europe showed that, at a regional level, private label’s volume share was consistently highest in categories such as bakery and biscuits, fresh, dairy, and pets.**
Retailer-Led Innovation
Given the opportunity of a constrained shopper and the unique time available to set themselves apart from rivals, retailers have continued to innovate with their private labels during the pandemic. The evolution of private-label products is, in many cases, linked into retailers’ corporate strategies and initiatives more widely, particularly in relation to health and sustainability credentials.
Online-only retailer Ocado recently relaunched its private label, which formed part of its wider rebrand from green ‘apple’ to purple ‘grape’ colours, to give the brand more standout against the many existing shades of green within the grocery retail sector.
The bold new design has also given the brand a platform to enhance and spotlight its sustainability credentials. Ocado claims that the new range uses 27 tonnes less plastic packaging, 640,000 plastic nets have been removed, and nine million non-essential packaging components have been eliminated. It has also removed adhesive labels from its private-label egg boxes by printing product information directly onto the box. This is said to have saved ten tonnes of paper a year.
Meanwhile, France’s Intermarché has revamped its entry-level Top Budget private label. The range of 600 SKUs has had its packaging revamped, with a new logo used to improve on-shelf standout. A focused investment on nutrition and the quality of ingredients has seen the brand remove certain additives from products and add Nutri-Score labelling to all products in the range.
In a series of separate launches, Portugal’s Continente has expanded its private-label ranges to include more healthy snacks, environmentally friendly products and vegetarian goods, to meet shopper demand in these areas.
Under its Powered by Plants range, the retailer introduced meat-free burgers, nuggets and meatballs made exclusively from vegetable protein, while, as part of its Equilíbrio brand, it added snacks, and environmentally friendly cleaning products under the Eco range. In terms of the latter, all the range’s products are made with sustainable raw materials that are biodegradable and sold in packaging made of recycled and recyclable materials.
Finally, really underlining how a retailer can target shoppers across the spending spectrum, Despar Italia has recently introduced several new private-label products to meet a range of budgets.
Firstly, it added several new products under its Special Edition label, which included sliced meats and traditional cheeses. More recently, it added eight new private-label pizzas to its frozen range. Four of the pizzas are made using traditional ingredients sourced from across Italy, while the others provide simpler flavours and are aimed at shoppers looking for a value alternative.
Sustaining Private Label Growth
The short- to medium-term outlook for private label in Europe appears to be positive. A combination of shoppers’ perceptions of the products improving and the current economic backdrop creates opportunities, both for innovation and growth.
Retailers will need to maintain their investments and find new ways to activate their private labels in store and online, but, in many countries, these steps should help them to benefit in the long term.
For more information, visit www.igd.com/commercialinsight. [Sources: *IGD, Brand and private label quarterly update – December 2020, https://bit.ly/3sFi0kJ; **PLMA, International Private Label Yearbook.]
© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Private Label news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
