Europe, U.S. Still Largest Private Label Markets, But Others Growing
New York -- Sales of private label consumer packaged goods are a large and growing global phenomenon, according to a new study released today by ACNielsen.
In the 36 countries and 80 categories studied, consumers spent 15 percent of total value sales on private label consumer packaged goods, but with widespread diversity across both markets and product types.
Europe remains the region with the largest private label share of total retail sales at 22 percent, with North America second at 16 percent. Even excluding Wal-Mart's private label sales, the United States remains the largest single market for private label sales in absolute dollars, while Switzerland has the highest private label share at 38 percent. More than 95 percent of private label sales are found in Europe and North America.
In terms of the rate of growth for private label products, however, the study revealed a decidedly different picture. Latin America, Asia Pacific, and emerging markets all have very small private label markets in terms of overall retail sales, but are experiencing much more rapid sales growth.
For example, the emerging markets of the Czech Republic, Hungary, Poland, and South Africa saw a collective growth rate of 48 percent compared with 2002, while Latin America and Asia Pacific saw year-over-year growth rates of 16 percent and 14 percent, respectively. European growth was 6 percent, while North America, excluding Wal-Mart in the United States, remained unchanged from 2002. Overall, growth rates for private label products outpaced those of manufacturers in nearly two-thirds of the countries studied (22 of 36).
"The high growth rates for private label in the developing markets are directly related to the expansion of global retailers beyond their traditional geographic borders," said Jane Perrin, ACNielsen managing director of global services and sponsor of the study, "The Power of Private Label -- A Review of Growth Trends Around the World." "As they build infrastructure, they build their private label brands."
As expected, some of the largest private label categories were within "traditional" strongholds that are often viewed as commodities, like the paper products, plastic bags, and wraps area. For instance, nearly half (46 percent) of aluminum foil sales were private label products, while plastic wrap/rolls and kitchen paper/towels accounted for 33 percent and 32 percent, respectively, of their sales to private label.
In the food area, complete ready meals (often offered in a special section of a store) had a 51 percent private label share, while private label milk represented 44 percent of the total market and more than US$11 billion in actual value sales.
Beyond traditional categories, some distinct trends begin to emerge. In today's private label market, a different level of products has come to the fore -- the premium "branded" private label product. These products offer consumers a quality private label choice as well as providing retailers with an additional selling point for their stores. Some of these products may be branded with the retailer's name or even have a brand image all their own, such as the President's Choice brand at Loblaws.
Due to this "premium" phenomenon, some categories once deemed unreachable by private label are starting to see significant growth rates. Nontraditional categories such as lipstick/gloss, facial cleansing, eye shadow, baby food, drinking yogurt, and sports energy drinks represent very small actual private label sales, but are all experiencing rapid growth rates vs. comparable manufacturer brands.
In its analysis, ACNielsen found that in the countries and categories studied, private label products were on average 31 percent cheaper than their manufacturer counterparts. This differential has remained fairly consistent since ACNielsen's previous global study in 1998. Within the countries and categories studied, however, important variances exist. In Poland the differential was 50 percent, where in Hong Kong it was only 10 percent. Europe, with its private label market share dominance, was home to seven of the top 10 countries with the biggest differential between private label and manufacturer brands. The United States had the average differential of 31 percent.
One interesting finding uncovered by ACNielsen is that in some categories, private label prices were found, on average, equal to or even higher than manufacturer branded products. One of the many drivers behind this trend is the previously mentioned retailer strategy of offering consumers premium "branded" private label products as a high-quality option and unique selling point for the store. Other factors include the presence of private label products sourced from "imports" and thus more expensive than domestic manufacturer brands, differences in product package sizing, and manufacturer brands being more often found on promotion than private label, thus bringing their average price down.
Commenting on the future prospects of private label worldwide, Perrin said, "Growth will continue as retailers become more and more sophisticated marketers and continue to expand to new markets. While the role of 'low price -- high volume' for private label will always exist, retailers will also continue to build on the power of private label by offering even more premium-priced, higher-quality products. Manufacturers of branded products will see private label as a growing competitive threat in the global marketplace."
In the 36 countries and 80 categories studied, consumers spent 15 percent of total value sales on private label consumer packaged goods, but with widespread diversity across both markets and product types.
Europe remains the region with the largest private label share of total retail sales at 22 percent, with North America second at 16 percent. Even excluding Wal-Mart's private label sales, the United States remains the largest single market for private label sales in absolute dollars, while Switzerland has the highest private label share at 38 percent. More than 95 percent of private label sales are found in Europe and North America.
In terms of the rate of growth for private label products, however, the study revealed a decidedly different picture. Latin America, Asia Pacific, and emerging markets all have very small private label markets in terms of overall retail sales, but are experiencing much more rapid sales growth.
For example, the emerging markets of the Czech Republic, Hungary, Poland, and South Africa saw a collective growth rate of 48 percent compared with 2002, while Latin America and Asia Pacific saw year-over-year growth rates of 16 percent and 14 percent, respectively. European growth was 6 percent, while North America, excluding Wal-Mart in the United States, remained unchanged from 2002. Overall, growth rates for private label products outpaced those of manufacturers in nearly two-thirds of the countries studied (22 of 36).
"The high growth rates for private label in the developing markets are directly related to the expansion of global retailers beyond their traditional geographic borders," said Jane Perrin, ACNielsen managing director of global services and sponsor of the study, "The Power of Private Label -- A Review of Growth Trends Around the World." "As they build infrastructure, they build their private label brands."
As expected, some of the largest private label categories were within "traditional" strongholds that are often viewed as commodities, like the paper products, plastic bags, and wraps area. For instance, nearly half (46 percent) of aluminum foil sales were private label products, while plastic wrap/rolls and kitchen paper/towels accounted for 33 percent and 32 percent, respectively, of their sales to private label.
In the food area, complete ready meals (often offered in a special section of a store) had a 51 percent private label share, while private label milk represented 44 percent of the total market and more than US$11 billion in actual value sales.
Beyond traditional categories, some distinct trends begin to emerge. In today's private label market, a different level of products has come to the fore -- the premium "branded" private label product. These products offer consumers a quality private label choice as well as providing retailers with an additional selling point for their stores. Some of these products may be branded with the retailer's name or even have a brand image all their own, such as the President's Choice brand at Loblaws.
Due to this "premium" phenomenon, some categories once deemed unreachable by private label are starting to see significant growth rates. Nontraditional categories such as lipstick/gloss, facial cleansing, eye shadow, baby food, drinking yogurt, and sports energy drinks represent very small actual private label sales, but are all experiencing rapid growth rates vs. comparable manufacturer brands.
In its analysis, ACNielsen found that in the countries and categories studied, private label products were on average 31 percent cheaper than their manufacturer counterparts. This differential has remained fairly consistent since ACNielsen's previous global study in 1998. Within the countries and categories studied, however, important variances exist. In Poland the differential was 50 percent, where in Hong Kong it was only 10 percent. Europe, with its private label market share dominance, was home to seven of the top 10 countries with the biggest differential between private label and manufacturer brands. The United States had the average differential of 31 percent.
One interesting finding uncovered by ACNielsen is that in some categories, private label prices were found, on average, equal to or even higher than manufacturer branded products. One of the many drivers behind this trend is the previously mentioned retailer strategy of offering consumers premium "branded" private label products as a high-quality option and unique selling point for the store. Other factors include the presence of private label products sourced from "imports" and thus more expensive than domestic manufacturer brands, differences in product package sizing, and manufacturer brands being more often found on promotion than private label, thus bringing their average price down.
Commenting on the future prospects of private label worldwide, Perrin said, "Growth will continue as retailers become more and more sophisticated marketers and continue to expand to new markets. While the role of 'low price -- high volume' for private label will always exist, retailers will also continue to build on the power of private label by offering even more premium-priced, higher-quality products. Manufacturers of branded products will see private label as a growing competitive threat in the global marketplace."