Customer loyalty led independent brands to dominate supermarket shelves. That’s no longer the case. Customers continue to buy private label products.
Katya Witham is Associate Director at Mintel Food & Drink. She says: “There is a notable increase in the popularity of own-label products over independent brands across Europe.”
Statista shows that private label consumer products are more likely to grow in terms of sales than branded products. This trend is particularly strong in Europe.
Statista spokesperson says that the private label segment is most popular in Europe, followed by North America. "Depending on the country you are in, private labels can account for between 21 billion and 52 billion of European supermarket sales."
How have supermarkets managed to so effectively change the perception of private label products from outsiders to competitors? First, cost is the main factor.
What was the impact of private label products?
This trend is driven by [Europe's] Mintel's Witham, who says the current cost of living crisis has led consumers to reduce their financial stress by making smarter purchases. They are increasingly choosing private label products, as they tend to be more affordable.
A significant number of consumers are buying more products with their own brands.
Witham says a significant number of consumers are buying more own-brand products. For example, 18 to 23 percent of food shoppers in countries including Spain, the UK, France, Germany, Italy and the US have bought more standard own-brand food and soft drinks products over the past year.
Consumers are also actively moving away from independent brands.
Witham says that "around three in ten European consumers said they are buying fewer branded products. This shows a broader shift towards own-label alternatives."
This trend continues to increase, proving that consumer loyalty is changing permanently even as the economic recovery in Europe strengthens. The reason for this is quality.
Witham says consumer perception has changed positively over the years as the quality and value of private label products has improved. Today, consumers view private label products as comparable to, or even superior to, branded products in terms of quality.
The introduction of premium private label products, such as Tesco Finest and Sainsbury's Taste The Difference, and Carrefour's Reflet de France, has helped to raise the appeal and status of these offerings.
A spokesperson for market research firm NIQ said retailers have invested in private label strategies to shift perceptions beyond basic ‘value for money’ options. This has involved introducing a wider range of products as brands reduce their offerings, rebranding lines and packaging to attract more shoppers and investing in a strong omnichannel experience that can compete with big brands.
Consumers are also responding positively to retailers' increased focus on private label product lines.
The Statista spokesperson says consumers have turned to private label products because they offer comparable quality or better value than the brands they previously purchased.
As brand development company Qualtrics notes, “Brand loyalty can mean the difference between meeting revenue goals and not.”
What future for private labels?
In the food and beverage sector, private label products have a growing market share. They also benefit from a higher level of customer loyalty. While this may be good for supermarkets, it is bad for independent brands that are already experiencing a decline in consumer interest. Take Nestlé. Full-year financial forecasts downgraded due to weaker market.
Private label products are a real threat to independent brands in terms of market share. Private label products, which are more affordable and offer similar quality, have become increasingly competitive as consumers place more importance on value.
The rise of private labels is also a victory for consumers who benefit from increased competition in the market.
Witham says: “This shift is forcing independent brands to innovate to maintain their position in the market.”
Statista reports that the foods consumers are currently turning to are crisps, snacks, cereals, biscuits, sweets and even bread. However, this situation could change once supermarkets realise the potential of their own brand products and expand their product range.
Food and beverage spokesperson Dee Set said consumers and retailers now see the benefits of investing in private label products, so retailers will continue to invest in expanding their product range and improving their current offerings.
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