Own label is up from 40% to 44% share of the market. How are suppliers attending the World of Private Label show planning to keep up the pace? Rachel Barnes reports
Everyone predicted that the recession would prompt shoppers to save money by switching from brands to own label.
And at first glance that seems to have been the case. Value sales of budget own-label goods have grown by an impressive 9.3% over the past year, with volume up 2.7% [Kantar Worldpanel 52w/e 21 February].
But the picture isn't quite that simple. The economic gloom has also prompted shoppers to trade down within own label. While budget own-label boomed, premium ranges slipped 0.2% by value and 4% by volume, taking total own-label value growth to a more modest 3.2% while branded goods powered ahead with 6.6% growth [Kantar].
The success of brands over the past year has primarily been down to heavy promotional activity, claims Brian Sharoff, president of the Private Label Manufacturers Association, the organiser of next month's World of Private Label show in Amsterdam. But, even if the brands are keen to continue promoting, Sharoff argues that retailers will strike a careful balance to ensure they do not damage sales of their own-label goods.
"When the brands are promoting hard, retailers make money from those. Then, when brands cut back on promotions, retailers make more money from own label the trick is balancing the two to maximise profits. Retailers such as Tesco do that particularly well."
The question is: will that balance be in favour of own-label or branded over the coming months?
The World of Private Label show couldn't come at a more pivotal moment for own label, coinciding as it does with the tentative emergence of the UK from recession. All eyes are on consumers to see whether they trade up within own label to more premium offerings or continue to buy into heavily promoted branded goods. Sharoff believes the foundations are there for strong own-label growth.
Although brands have grown more than own label in the past 12 months, own label has increased its market share by volume, he points out. "Last year, own label went from 40% to 44% market share which is very strong growth," he says. The reason for this, he says, is that retailers are, more than ever, putting emphasis on own label.
Own label has been particularly prominent in retailers' advertising campaigns and on their websites, with Sainsbury's Switch and Save campaign encouraging consumers to try own-label alternatives to their regular branded choices, and Tesco's website flagging up cheaper own-label versions of consumers' branded selections. Even premium retailer Waitrose got in on the budget own-label action with the launch of Essential Waitrose in March last year.
Sharoff claims brands have been put on the back foot by these campaigns. "They know retailers are planning to be more aggressive with own label and realise the historical quality issue is no longer a problem," he adds. "Own label is increasingly becoming a quality product that is often equal to or even better than branded."
Growing numbers
Given this positive outloook, it's not surprising that the World of Private Label show has grown from 3,200 to 3,500 exhibitors since the last event, and now boasts a hefty 40 national pavilions. The British Pavilion features 16 exhibitors, nine of which are new this year [see box, right].
An area in which British own label has been particularly successful over the past year or so, says Sharoff, is tertiary brands, introduced by some of the big chains to stem the rise of the discount retailers. Tesco's introduction of a Discounter range has been particularly effective, says Sharoff.
"This was the first time a retailer had successfully tackled the growth of discounters in their own backyard," he says. "Using a discounter label is a way for Tesco and retailers who have since adopted it, such as Loblaw in Canada, to stop consumers running off to Aldi."
With traditional own-label offers also increasingly important to the big four, it is no surprise that they will all have representatives at the show, as will M&S, Waitrose, Boots, Whole Foods Market and the discounters.
"It's important to go to shows like this to explore what's on offer for our customers," says a Sainsbury's spokeswoman. "It is a good way for us to identify medium to large-scale suppliers that could meet a specific product need for us."
Many British own-label suppliers that are attending the show are optimistic about the export opportunities, as well as the domestic market.
Premier Foods and United Biscuits are embarking on major own-label drives in Europe this year and are using the World of Private Label show as a platform for growth.
"We see a lot of opportunity in Europe, particularly with the discounters," says Alison Evans, who is managing UB's presence at the show. "Our brands help with recognition in the first instance, but our own-label offer is of high quality in its own right so we don't think we need to rely on our brands."
Own label accounts for 37% of Premier Foods' £2.7bn UK business, and the company will showcase some of its proprietary brands to get buyers interested. "Our export business has continued to develop and will be a focus for Premier in the next few years," says export marketing manager Holly Simmons.
UK retailers will also be showing their wares at the event through the Idea Supermarket showcase, exhibiting new food and non-food products and packaging alongside retailers from across the globe.
Tesco is looking to draw attention back to the premium end of own label by demonstrating how restaurant-quality foods can tap into the trend for "eating out at home", while M&S will showcase health and wellness.
Other exhibits will include Fairtrade, environmentally friendly, local sourcing, organic food and organic health & beauty. The show will also feature the regular New Product Expo.
Retailers and other visitors will also be able to use PLMA's matchmaker facility to arrange meetings with exhibitors before the show begins. "This is not really a show for walking up and down the aisles and ordering products on the spot," says Sharoff. "That's not the way own label is purchased. The show is about building relationships."
Despite the presence of such major UK players at the show this year, Sharoff says the number of British suppliers that attend the event is small compared with those from other countries. "Because the UK market is so good and so big, local manufacturers don't always worry about exports as they can have enough in the UK to keep them busy," he says.
The recession may not have had the unreservedly positive impact on own label that was expected. But as the economy recovers, visitors to the PLMA World of Private Label show will be able to pick up plenty of tips for coaxing consumers back to the premium end of own label.
Key facts
Where: RAI Exhibition Centre, Amsterdam
When: 18-19 May
What: The Private Label Manufacturers Association's annual World of Private Label show brings retailers and suppliers together to help them develop their own-label offerings
Visit: www.plmainternational.com
Focus On PLMA
Everyone predicted that the recession would prompt shoppers to save money by switching from brands to own label.
And at first glance that seems to have been the case. Value sales of budget own-label goods have grown by an impressive 9.3% over the past year, with volume up 2.7% [Kantar Worldpanel 52w/e 21 February].
But the picture isn't quite that simple. The economic gloom has also prompted shoppers to trade down within own label. While budget own-label boomed, premium ranges slipped 0.2% by value and 4% by volume, taking total own-label value growth to a more modest 3.2% while branded goods powered ahead with 6.6% growth [Kantar].
The success of brands over the past year has primarily been down to heavy promotional activity, claims Brian Sharoff, president of the Private Label Manufacturers Association, the organiser of next month's World of Private Label show in Amsterdam. But, even if the brands are keen to continue promoting, Sharoff argues that retailers will strike a careful balance to ensure they do not damage sales of their own-label goods.
"When the brands are promoting hard, retailers make money from those. Then, when brands cut back on promotions, retailers make more money from own label the trick is balancing the two to maximise profits. Retailers such as Tesco do that particularly well."
The question is: will that balance be in favour of own-label or branded over the coming months?
The World of Private Label show couldn't come at a more pivotal moment for own label, coinciding as it does with the tentative emergence of the UK from recession. All eyes are on consumers to see whether they trade up within own label to more premium offerings or continue to buy into heavily promoted branded goods. Sharoff believes the foundations are there for strong own-label growth.
Although brands have grown more than own label in the past 12 months, own label has increased its market share by volume, he points out. "Last year, own label went from 40% to 44% market share which is very strong growth," he says. The reason for this, he says, is that retailers are, more than ever, putting emphasis on own label.
Own label has been particularly prominent in retailers' advertising campaigns and on their websites, with Sainsbury's Switch and Save campaign encouraging consumers to try own-label alternatives to their regular branded choices, and Tesco's website flagging up cheaper own-label versions of consumers' branded selections. Even premium retailer Waitrose got in on the budget own-label action with the launch of Essential Waitrose in March last year.
Sharoff claims brands have been put on the back foot by these campaigns. "They know retailers are planning to be more aggressive with own label and realise the historical quality issue is no longer a problem," he adds. "Own label is increasingly becoming a quality product that is often equal to or even better than branded."
Growing numbers
Given this positive outloook, it's not surprising that the World of Private Label show has grown from 3,200 to 3,500 exhibitors since the last event, and now boasts a hefty 40 national pavilions. The British Pavilion features 16 exhibitors, nine of which are new this year [see box, right].
An area in which British own label has been particularly successful over the past year or so, says Sharoff, is tertiary brands, introduced by some of the big chains to stem the rise of the discount retailers. Tesco's introduction of a Discounter range has been particularly effective, says Sharoff.
"This was the first time a retailer had successfully tackled the growth of discounters in their own backyard," he says. "Using a discounter label is a way for Tesco and retailers who have since adopted it, such as Loblaw in Canada, to stop consumers running off to Aldi."
With traditional own-label offers also increasingly important to the big four, it is no surprise that they will all have representatives at the show, as will M&S, Waitrose, Boots, Whole Foods Market and the discounters.
"It's important to go to shows like this to explore what's on offer for our customers," says a Sainsbury's spokeswoman. "It is a good way for us to identify medium to large-scale suppliers that could meet a specific product need for us."
Many British own-label suppliers that are attending the show are optimistic about the export opportunities, as well as the domestic market.
Premier Foods and United Biscuits are embarking on major own-label drives in Europe this year and are using the World of Private Label show as a platform for growth.
"We see a lot of opportunity in Europe, particularly with the discounters," says Alison Evans, who is managing UB's presence at the show. "Our brands help with recognition in the first instance, but our own-label offer is of high quality in its own right so we don't think we need to rely on our brands."
Own label accounts for 37% of Premier Foods' £2.7bn UK business, and the company will showcase some of its proprietary brands to get buyers interested. "Our export business has continued to develop and will be a focus for Premier in the next few years," says export marketing manager Holly Simmons.
UK retailers will also be showing their wares at the event through the Idea Supermarket showcase, exhibiting new food and non-food products and packaging alongside retailers from across the globe.
Tesco is looking to draw attention back to the premium end of own label by demonstrating how restaurant-quality foods can tap into the trend for "eating out at home", while M&S will showcase health and wellness.
Other exhibits will include Fairtrade, environmentally friendly, local sourcing, organic food and organic health & beauty. The show will also feature the regular New Product Expo.
Retailers and other visitors will also be able to use PLMA's matchmaker facility to arrange meetings with exhibitors before the show begins. "This is not really a show for walking up and down the aisles and ordering products on the spot," says Sharoff. "That's not the way own label is purchased. The show is about building relationships."
Despite the presence of such major UK players at the show this year, Sharoff says the number of British suppliers that attend the event is small compared with those from other countries. "Because the UK market is so good and so big, local manufacturers don't always worry about exports as they can have enough in the UK to keep them busy," he says.
The recession may not have had the unreservedly positive impact on own label that was expected. But as the economy recovers, visitors to the PLMA World of Private Label show will be able to pick up plenty of tips for coaxing consumers back to the premium end of own label.
Key facts
Where: RAI Exhibition Centre, Amsterdam
When: 18-19 May
What: The Private Label Manufacturers Association's annual World of Private Label show brings retailers and suppliers together to help them develop their own-label offerings
Visit: www.plmainternational.com
Focus On PLMA
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