The recent story of private label products vs. brands is a familiar one. Take an environment where food inflation is higher than real disposable income, add a decrease in product innovation, stir in squeezed retailers and this is what you get: a steady growth in private label sales.
In fact, between 2011 and 2013, private label (PL) sales have risen 1.32% at a total grocery level, according to the research we commissioned from Kantar Worldpanel for our Food Sense Forum event. And this trend continues into 2014 – with PL sales accounting for 46.49% of total grocery sales in January, 48.06% for February, and up by 0.88% compared to the same period in 2013.
Graph 1: Brand (Orange) versus all PLs: Standard, Premium and Economy (Green), Source: Kantar Worldpanel
So far, so obvious. When times are tough, consumers shop around. But is the value savvy consumer here to stay?
There is evidence to show they are not going anywhere in a hurry. Despite the rising fortunes of Aldi and Lidl, the research we commissioned shows that store choice and promotions are less significant drivers of above inflation spend than product choice. See the chart looking at why shoppers trade up/down from a baseline where spend growth matches exactly with inflationary growth.
Graph 2: This chart shows the 4 elements of trading up/down and plots them as a time series – bars below the line show how shoppers are trading down, bars above how they are trading up. The base line (or 0.0) is when spend growth matches exactly with inflationary growth, i.e. there is no trading up/down taking place. The 4 elements are Volume Change (Pink), Store Choice (Green), Promotion (Purple) and Product Choice (Orange).
Source: Kantar Worldpanel
The only time in the last three years that spend rose above inflation was in July 2012, when consumers traded up to more expensive products, driven by the sheer joy of the Olympics and the prospect of an actual hot summer.
While the fortune of brands has been linked to limited R&D and product innovation during the economic downturn, in reality just half of all new products survive two years on the shelves, according to Kantar Worldpanel.
It gets worse – the average product lifespan is 4-5 years.
With increasing competition among retailers for grocery spend, private label is set to become the new battleground.
Adrian Atterby, Director, Kantar Worldpanel, said: “For supermarkets, private label (PL) and the higher margins they achieve are a much needed antidote to the challenging environment. In some categories, branded products have disappeared from the shelves completely. In order for brands to remain successful and to warrant a place on shelf they must demonstrate a clear USP and one that isn’t easily copied by PL products.”
The key to a successful new product launch and survival in the fight for shelf space is category and story innovation.
In economic recovery, innovation that challenges category norms by being story-led, rather than product led, is likely to pay an increasingly important role. To emerge victorious, the recipe for success is equal measures of product innovation and story innovation.
Source: http://www.msllondon.com/blogs/2014/mar/25/shelf-wars-who-will-seize-the-space 25th March 2014
(Full presentation slides below)In fact, between 2011 and 2013, private label (PL) sales have risen 1.32% at a total grocery level, according to the research we commissioned from Kantar Worldpanel for our Food Sense Forum event. And this trend continues into 2014 – with PL sales accounting for 46.49% of total grocery sales in January, 48.06% for February, and up by 0.88% compared to the same period in 2013.
Graph 1: Brand (Orange) versus all PLs: Standard, Premium and Economy (Green), Source: Kantar Worldpanel
So far, so obvious. When times are tough, consumers shop around. But is the value savvy consumer here to stay?
There is evidence to show they are not going anywhere in a hurry. Despite the rising fortunes of Aldi and Lidl, the research we commissioned shows that store choice and promotions are less significant drivers of above inflation spend than product choice. See the chart looking at why shoppers trade up/down from a baseline where spend growth matches exactly with inflationary growth.
Graph 2: This chart shows the 4 elements of trading up/down and plots them as a time series – bars below the line show how shoppers are trading down, bars above how they are trading up. The base line (or 0.0) is when spend growth matches exactly with inflationary growth, i.e. there is no trading up/down taking place. The 4 elements are Volume Change (Pink), Store Choice (Green), Promotion (Purple) and Product Choice (Orange).
Source: Kantar Worldpanel
The only time in the last three years that spend rose above inflation was in July 2012, when consumers traded up to more expensive products, driven by the sheer joy of the Olympics and the prospect of an actual hot summer.
While the fortune of brands has been linked to limited R&D and product innovation during the economic downturn, in reality just half of all new products survive two years on the shelves, according to Kantar Worldpanel.
It gets worse – the average product lifespan is 4-5 years.
With increasing competition among retailers for grocery spend, private label is set to become the new battleground.
Adrian Atterby, Director, Kantar Worldpanel, said: “For supermarkets, private label (PL) and the higher margins they achieve are a much needed antidote to the challenging environment. In some categories, branded products have disappeared from the shelves completely. In order for brands to remain successful and to warrant a place on shelf they must demonstrate a clear USP and one that isn’t easily copied by PL products.”
The key to a successful new product launch and survival in the fight for shelf space is category and story innovation.
In economic recovery, innovation that challenges category norms by being story-led, rather than product led, is likely to pay an increasingly important role. To emerge victorious, the recipe for success is equal measures of product innovation and story innovation.
Source: http://www.msllondon.com/blogs/2014/mar/25/shelf-wars-who-will-seize-the-space 25th March 2014
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