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    FEATURE: Private Label: Think global, act label

    Store brands are getting bigger than ever, and premium is tops as a global private label trend.

    Private label products are steadily increasing their share of the international consumer products marketplace, according to a new report from ACNielsen, a VNU business and sister company of Progressive Grocer. According to "The Power of Private Label 2005 Executive News Report," private label items made up 17 percent of total value sales for the 12 months ending the first quarter of 2005, up from the 15 percent level ACNielsen reported in 2003.

    For the study, ACNielsen collected retail measurement sales data from 38 markets, covering five regions: Europe, North America, the emerging Asia Pacific market, and Latin America. In total, these 38 markets represent more than 60 percent of the world's gross domestic product. The 38 markets studied were chosen as areas where there was an established private label presence.

    Private label growth was more than double the growth rate of manufacturer brands, 5 percent vs. 2 percent, ACNielsen said. In over two-thirds of the markets studied, private label sales increased faster than manufacturer brand counterparts.

    Europe maintained its traditional dominance in market share of private label value sales, with a 23 percent share across 17 local markets, and a growth rate of 4 percent. As in the 2003 report, the top five markets for share of sales are all in Europe: Switzerland, at 45 percent; Germany, at 30 percent; Great Britain, at 28 percent; Spain, at 26 percent; and Belgium, at 25 percent. The emerging markets of Croatia, the Czech Republic, Hungary, Slovakia, and South Africa collectively saw the highest private label growth rate of 11 percent, though achieved from a much smaller base.

    Bearing out the results of earlier studies, Latin America and Asia Pacific also had small private label markets in terms of share, but didn't show the same double-digit growth rates as in the other emerging markets. North America had both a high share (16 percent), and a considerable growth rate (7 percent).

    Although previous reports found that paper, plastic, and wraps, which encompass the aluminum foil, paper towel, and plastic wrap categories, have long been the dominant private label market share and sales leaders when compared with manufacturer brands, the latest study found that refrigerated foods, containing such categories as milk, cheese, and complete ready meals, had tied for the top spot with paper, plastic, and wraps. In terms of growth, refrigerated foods more than tripled that of paper, plastic, and wraps, with 9 percent as opposed to 2 percent.

    According to ACNielsen, the new popularity of refrigerated food confirms a steady trend in retailers' private label strategies: the introduction of private label items into premium segments that go beyond the "low price, high volume" commodity-driven practices of years past.

    "Strategically, retailers worldwide seem to be placing more and more of an emphasis on branding and marketing their private label wares to match the lifestyles and values of their shoppers," notes Jane Perrin, managing director of ACNielsen Global Services and sponsor of the ACNielsen Executive News Reports. "Retailers are expanding their brands far beyond a singular focus on low price points. We're even seeing retailers leverage the equity of their private label brands into areas such as personal finance, insurance, and telecommunications."

    ACNielsen additionally looked at who's buying private label, via consumer panel information collected from 14 markets worldwide. These household-focused insights showed that virtually everyone buys private label goods: 100 percent of households in two-thirds of the markets studied had bought private label items during the past year, and even the "lowest" penetration level, in Singapore, was still strong at 77 percent. With the growth of premium private label products, share of purchases skewed only slightly more toward lower-income and bigger families.

    While private label still commands only 17 percent of the international marketplace, in some markets it's far higher. For instance, private label share of value sales in Switzerland is now at its highest level, 45 percent. ACNielsen believes that its findings show that retailers around the globe can continue this successful expansion of private label, based on positive consumer attitudes. Backing up the company's assertions, a separate ACNielsen global study conducted in May 2005 across 38 markets revealed that 68 percent of consumers either slightly or strongly agreed with the statement "Private label brands are a good alternative to other brands."

    Says Perrin, "Whether worldwide shares will reach those of Switzerland, or even if high- share markets like Switzerland have reached their peak, is yet to be seen."

    The 'good alternative'

    More than two-thirds of shoppers responding to the study said private label products are a "good alternative" to major brands, as well as an "extremely good value for the money." Almost as many said they thought that such products offer quality that was "at least as good as that of the usual big brands."

    The perception that private label brands are a viable alternative to big-name brands was most prevalent in the highly developed regions of Europe (expressed by 78 percent), the Pacific (78 percent), and North America (77 percent); private label's cachet was lower in Latin American (64 percent) and other parts of Asia (51 percent).

    All of the top 10 markets that ranked private label products a good alternative were in Europe, led by the Netherlands, at 91 percent; Portugal, at 89 percent; and Germany, at 88 percent.

    On the other hand, eight of the bottom 10 markets were in Asia. In the two lowest ratings, only 35 percent of Japanese shoppers and 36 percent of Malaysian consumers said they agreed that private label brands were a good alternative to other brands.

    "Private label awareness and acceptance in Asia and other developing markets will, in part, go hand in hand with the growth of modern trade in these areas," says ACNielsen's chief marketing and client service officer, Tom Markert. "In some [markets], where the retail landscape is highly fragmented, a lot of shoppers are just getting used to visiting supermarkets and hypermarkets regularly for their groceries, and private label is still a relatively new concept for them."

    Pacific and North American shoppers (both at 81 percent) were the most likely to rate private label brands an extremely good value for the money.

    Europe was just behind, with 73 percent agreeing on value for money and 68 percent on quality. Meanwhile 67 percent of Latin American consumers considered private label an extremely good value, and 64 percent believed the quality of such products to be comparable with the big brands. Finally, 59 percent of Asian consumers thought private label products were an extremely good value, while 49 percent said that the products' quality rivaled that of the larger brands.

    When asked whether there were certain products "where quality really matters" and private label wasn't suitable, a worldwide average of 40 percent assented, with Latin Americans (51 percent) and Asians (48 percent) in the lead. Even in highly private label-developed regions, two in five Pacific consumers, or 41 percent, said that there were certain products unsuitable for private label. At the bottom of the scale, 27 percent of North Americans and 35 percent of Europeans believed that some products weren't suited to private label.

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