Store Brands

Store Brands Overview

  • Store Brands (Private Label/Own Label)

    • Critical part of the grocery industry.

    • Major contributor to retailers’ financial performance.

    • Notable growth observed in the UK from 2015 to 2020:

      • Sales of private labels grown by 14.3% in value and 15.8% in volume.

      • In contrast, branded products saw a 3.5% increase in volume but declined by 3.7% in value.

    • Discount grocers ALDI and Lidl contributed significantly, accounting for 68% of private label value growth during this period.

The Future of Store Brands

  • Potential peak for store brands estimated between 45% - 50% market share.

  • Private label value perceptions often outperform quality across many countries:

    • 27.9% of respondents in Europe view private labels as extremely good value for money.

    • Specific country sentiments (e.g., Sweden 21.9% and Norway 43.6%) demonstrate high expectations for quality.

    • Variety perception declines if the market share exceeds peak levels.

Impact of the Cost of Living Crisis

  • Own labels are outperforming brands during economic strain.

  • Reference: "10 charts proving own label is leaving brands in the dust" article sheds light on the dynamics.

Own Label Insights

  • Volumes depict a disparity:

    • Branded volume translates to 37% but equals 45% of sales.

    • Own label value line shows 5% volume converting to only 3% value.

    • Standard own label products convert 51% volume to 45% value.

    • Margins must also be factored into this comparison.

Growth Patterns in the UK (Own Brands)

  • General volume of goods declining by 3%, but brands specifically facing an 8% decline.

  • Brand value increased by 5%, while own label surged by 14%, influenced by inflation around 14%.

Value Growth in Discounters

  • Discounter retailer value growth comparisons between 2022 and 2023 (Source: Kantar 16 w/e 16 April 2023):

    • Lidl 29%, Aldi 27%, Asda 16%, M&S 13%, Tesco 11%, Sainsbury's 11%, Iceland 10%, Waitrose 6%, Co-op 5%, and Morrisons 2%.

Brand Competitiveness

  • Brands excel in:

    • High innovation and product differentiation.

    • Strong market support, brand equity, and longer purchasing cycles.

  • Private labels win in:

    • Low differentiation and frequent purchase products.

Store Brand Architecture

  • Breakdown of different tiered brands within retailers:

    • Standard Brands: Basic value offering, e.g., Tesco Value.

    • Budget Brands: Economical options, e.g., Sainsbury Economy.

    • Premium Brands: Higher quality offerings, e.g., Tesco Finest.

Evolution of Own Brands

  • Significant literature references detailing strategic roles and consumer perceptions in the trajectory of own brands.

Supplier Dynamics and Retailer Strategies

  • Retailers must consider supplier relationships and expectations, focusing on lean production and low costs.

  • Value brand production linked to supplier capability and innovation strength.

Conclusion: Benefits and Challenges of Store Brands

  • Store brands are vital for increasing retailer margins and contested price positioning.

    • Strong perceived value leads to better store loyalty across varying product types.

  • The necessity for ongoing monitoring of supplier activities is essential to support these brands.

  • Retailers are cautioned about the risks of subsidizing competitors through dual branding strategies.