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Fighting Private Label

Growth drivers, brand defence strategies and market opportunities
from

Understand which countries, categories and consumers offer the most potential for your brands across the eight main FMCG markets in Western Europe.

Discover what makes consumers switch to private labels, and how to benchmark the strengths and vulnerabilities of your brand.

Identify the most effective brand strategies for successful brand growth and defence against private labels in food, drinks and personal care.

Use AiMark and Europanel (GfK/TNS) unique gold standard data and trusted expert analysis from Business Insights to give you the right formula for success in your market.

Get inside the private label market and access a survey of 25,000 consumers and a panel of 178,000 households...

Published with the power of AiMark and Europanel (GfK and TNS) data...

B u s i n e s s I n s i g h ts

Fighting Private Label

Growth drivers, brand defence strategies and market opportunities

What our clients say...

I found the report to be most useful, perhaps because it provided an overview from different category perspectives. I felt that the report benefited from the consultant approach and offered original and considered thinking, rather than the 'shot in the dark', naive approach I have seen in other reports...

This new report provides exclusive gold standard data from AiMark and Europanel (from GfK and TNS) as well as trusted analysis from established private label experts from Business Insights.
Despite the phenomenal growth of private labels around the world, little is known about which specific factors drive private label success. Private label success is complex, and is not uniform across countries, FMCG categories, consumer types or retailers. Business Insights has teamed up with Europanel (from GfK and TNS) and AIMARK to bring you this brand NEW unique report, Fighting Private Label: Growth drivers, brand defence strategies and market opportunities. This unique product offering will enable you to understand the dynamics of private label growth by revealing the strengths and weaknesses of your private label or branded products, providing you with new and unique opportunities.

Business Development Director Kraft Foods

Unique information from a panel of 178,000 households analysed by private label experts
The data and analysis in this report is based on consumer panels of Europanel (from GfK and TNS), used to derive exclusive information on category sizes, brand & private label market size, share and pricing, retailer shares, household penetration and frequency of purchase. Consumer surveys conducted for this report, include expert analysis on hot issues such as category drivers, private label buying tendency, willingness to pay, store and brand loyalty. With research and analysis conducted through 2004 and early 2005, this report incorporates data from a survey of 25,000 consumers and a panel of 178,000 households.

The 4-C model of private label success

Countries

drivers

Fighting Private Label - know your market

The report provides: Detailed analysis of the private label market and the branded market for food, drinks and personal care in Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden and the UK down to category level. A complete understanding of each of the global trends in retailing and how they affect the future of branded FMCG and private labels. An in-depth insight into consumer factors driving private label growth, including sociodemographics, brand trust, willingness to pay premiums, perceptions of similarity and quality, brand and store loyalty. Actionable recommendations for cementing brand loyalty, increasing market share and implementing a successful defensive strategy against private label.
Categories
drivers

Customers

drivers

Private label success

Consumers

Source: Fighting Private Label

The 4-C model specifies four groups of drivers underlying private label success: country, category, customer (retailer) and consumer. By systematically examining why private label success differs across countries, categories, customers and consumers we are able to understand what is driving private label success in the global marketplace...

drivers

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Fighting Private Label

Key findings of this new report

Growth drivers, brand defence strategies and market opportunities

Index of Private Label share

In the last decade the market share of private labels has increased from 19% to 34% of total FMCG sales. In the same period, private label share in Spain increased even more dramatically - from 8% to a staggering 26%. Private label share is 77% higher in categories characterized by low advertising activity and 56% higher in categories where little new product activity takes place, compared to categories characterized by heavy advertising and new product activity, respectively. Private label lemonade has a high value share of 70.3% and a huge volume share of 81.7%. Around 62.8% of UK consumers purchased private label lemonade in 2003. In 2003, 28.4% of every Euro spent on food and beverages by Spanish consumers went on a private label product. In France the top three private label food categories have a penetration of between 70% and 80%; this is lower than for many countries including Belgium, Germany, the Netherlands, Spain and the UK, indicating that French consumers are less likely than consumers in these other countries to try out private label variants in a category. Hard discounters account for more than 20% of total FMCG sales in countries like Germany and Spain, while their market share in the UK is very small.

Brand trust as driver of private label share 140 120 100 80 60 40 20 0 Low High Manufacturer Brand Trust
Source: Fighting Private Label

127

127 100 (average) 88 79

Low

High

Trust Gap

If a brand does not live up to its promises, all past investments in brand advertising are lost. Consequently, economists have pointed out that brands can be used as credible market signals. However, increasingly, private labels are acting as "regular" brands and retailers may lose shoppers if the private label does not fulfill its promise. Private label share is higher in those categories where trust in manufacturer brands is relatively low (+44%) and where there is a small trust gap between manufacturer brands and private labels (+61%)...

Actionable strategies to drive your profits forward

Maximise your sales as a result of understanding the price sensitivity of your specific category by analysing price differences between manufacturer food, drinks and personal care brands and their private label equivalents. Forecast future profitability hotspots for food, drinks and personal care brands by discovering whether your food and drink branded product falls into the category of brand hell, brand threat, brand opportunity or brand heaven. Devise successful customer retention and acquisition strategies by comparing consumer loyalty towards your brand versus their loyalty toward stores. Understand which countries, customers and categories have the most potential for your branded products across the eight leading private label markets across Western Europe.

Top five categories with the highest and lowest price differences between the average food brand and the average PL equivalent, Germany
Price increase of average brand versus average private label, 2 003, price index
260 250 240 230 220 210 200
Top 5 categories with highest price premium between branded and private label

Ice Mayon Packet Potato Noodles soups cream naise crisps 140 Top 5 categories with lowest price premium 120 between branded and private label 100 80 60 40

Peanut Cooking butter sauces

Butter

Milk

Tinned tuna

Source: Fighting Private Label

Premiums of brands over PLs in Germany can reach in excess of 100%, with branded noodles holding the highest premium of all the categories analyzed at 156% (index: 256). Interestingly, the PL noodles category also holds the biggest difference in premiums between 2000 and 2003 from 534% (index: 634) in 2000, the premium dropped dramatically...

B u s i n e s s I n s i g h ts

Fighting Private Label

Growth drivers, brand defence strategies and market opportunities

Hot issues covered in this report

Private label success Private label success is greatest in Western Europe, with an aggregate private label share of 26.7% in the Big-Five Western European economies and 24.8% in the smaller Western European countries. Western Europe is the worlds most developed region in terms of private labels. Brand quality The higher the perceived quality of manufacturer brands relative to private labels in a category, the lower the private label share is: the market share of private labels is 54% higher in those categories in which consumers perceive a small quality difference between manufacturer brands and private labels compared to categories in which consumers perceive a large difference in quality between the two types of brands. Hard discounters Hard discounters are the engine of private label growth. In most European countries, hard discounter private label products account for over 50% of the recent increase in private labels between 2000 and 2002. In some countries, such as Germany and Ireland, hard discounters are even more influential. Integrated strategy Successful brand defence is reliant on an integrated, cohesive and consistent strategy. Despite increasing levels of private label growth, brands such as Walkers, San Miguel and Nivea have shown manufacturers that effective defence and brand growth against private labels is achievable.

Ranked category drivers in UK

Driver 1 High (Works Against PL) 0 10 20 30 40 Rank Vs 92 50 Categories 60 (Favours 70 PL) 80 Low 90

Driver 2

Driver 3

Driver 4 Driver 5

Driver 6

Driver 7

Driver 8

Source: Fighting Private Label

Branded potato crisps are perceived by consumers to fare very well compared to private labels. For example, potato crisps are among the top 10 categories in terms of perceived advertising intensity, innovation or quality difference, all of which significantly affect the strength of private labels. It is no surprise that potato crisps arrive at an extremely low private label attractiveness index...

Your questions answered

The national-cultural environment as driver of private label share
140 120 Index of PL share 100 80 60 40 20 0 Low High Low High 115 121 100 (average) 86 81

Does the context of the global marketplace in which private label operates have a lot to do with its success? What are the private label shares around the world? What are the drivers of private label share across across different food and drink categories? Which countries, products and retailers perform better in private label markets and why? What is the typical profile of a private label buyer? How much trust do consumers have in private label products compared to branded products? What is the future of the private label market and how can branded manufacturers reclaim their share?

Power Distance

Uncertainty Avoidance

Note: These median splits compare two groups of countries which score high/low on the respective driver. While based on 2002 data, these indices would probably look identical with 2004 data as well.

Source: Fighting Private Label

Manufacturer brands are powerful cultural symbols through which cultural meaning and class information is communicated to consumers, and hence should be relatively more favored in high power distance societies. Private label market share is 34% higher in low power distance societies than in high power distance societies...

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Table of contents
EXECUTIVE SUMMARY

Fighting Private Label: Growth drivers, brand defence strategies and market opportunities

CHAPTER 1: INTRODUCTION TO THE PRIVATE LABEL MARKET Introduction - Key objective The 4-C conceptual framework CHAPTER 2: GLOBAL TRENDS IN RETAILING Summary Introduction The global retailscape Private label shares around the world Private label shares for different types of FMCG CHAPTER 3: PRIVATE LABEL DRIVERS ACROSS COUNTRIES Summary Introduction The national-cultural environment The economic-institutional environment The retail environment Strategic country-private label success matrix CHAPTER 4: PRIVATE LABEL DRIVERS ACROSS CATEGORIES Summary Introduction - Price-quality considerations - Importance of the category to consumers - Brand trust - Consumer buying process - Marketing activity - Production issues - Key overall drivers of private label success - Secondary drivers of private label success: - Minor drivers of private label success: - Drivers having no systematic impact on private label success: - San Miguel Beer in Spain - WC Bref in Croatia CHAPTER 5: IMPACT OF RETAILER SIZE AND STORE LOYALTY Summary Introduction - Retailer size - Store loyalty versus brand loyalty

Hard discounting in Europe - The growth of hard discounters across Europe - Hard discounters as engines of private label growth CHAPTER 6: PROFILE OF THE PRIVATE LABEL BUYER Summary Introduction - A profile of the private label buyer CHAPTER 7: THE MANUFACTURER BRAND PRIVATE LABEL PRICE DIFFERENTIAL Summary Introduction - The private label price differential - Manufacturer brands - Are consumers willing to pay more? - Differences in willingness to pay between categories - Differences in willingness to pay between consumers What are the key drivers? - Category drivers: - Consumer drivers: - Category drivers: - Consumer drivers: CHAPTER 8: CASE STUDIES Nivea Walker's Crisps - Category status CHAPTER 9: THE EMERGENCE OF A CYCLE OF PRIVATE LABEL SUCCESS Key findings of European analysis CHAPTER 10: PRIVATE LABEL IN BELGIUM Impact of country drivers on private label success - Risk assessment of the major drivers of private label in Belgium The retailer landscape Private label success by country - Market value and volume share - Private label market value share definition - Private label market volume share definition Focus on the Belgian food market

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Table of contents continued...

- Private label value growth versus brand/private label pricing The drinks market - private label value growth versus price differential The personal care market - Diapers show an interesting perspective on the Belgian personal care sector Price premium of brands over private label products - Price comparison of private label food versus branded food - Price comparison of private label drinks versus branded drinks - Price comparison of private label personal care versus branded personal care Private label penetration Rates - Private label penetration in food - Private label penetration in drinks - Private label penetration in personal care - The 'private label attractiveness' index Cross-sector comparison: food, drink and personal care - Brand hell - Brand threat - Brand opportunity - Brand heaven Conclusions Belgium's position in Europe - PL success: country comparison - Ranking of the eight countries on these factors

Fighting Private Label: Growth drivers, brand defence strategies and market opportunities

CHAPTER 16: PRIVATE LABEL IN SWEDEN (29 PAGES) CHAPTER 17: PRIVATE LABEL IN THE UK (30 PAGES) Sample of figures in this new report... Figure 1.1: The 4-C model of private label success Figure 1.2: Defining private label success Figure 2.3: Retailers are getting bigger and bigger in FMCG vis--vis manufacturers Figure 2.4: Top-30 FMCG retailers worldwide sales ($ bn) Figure 2.5: Private label shares in different world regions Figure 2.6: Growth in private label shares in different world regions (%) Figure 2.7: Private label shares per type of FMCG by world region Figure 2.8: Growth in private label shares per type of FMCG by world region Figure 2.9: The national-cultural environment as driver of private label share Figure 2.10: The economic-institutional environment as driver of private label share Figure 2.11: The retail environment as driver of private label share Figure 2.12: The strategic country - private label success matrix Figure 3.13: Price-quality considerations as drivers of private label share Figure 3.14: Importance of the category as driver of private label share Figure 3.15: Brand trust as driver of private label share Figure 3.16: Marketing activities as drivers of private label share Figure 3.17: Private label production issues as drivers of private label share Figure 3.18: Drivers of Private Label success across categories Figure 3.19: A major and successful innovation by San Miguel beer in Spain, together with Mercadona's private label Figure 3.20: Bref launches a continuous stream of new lavatory cleaning products Figure 4.21: The bigger the retailer, the larger the private label share Figure 4.22: The relationship between store loyalty and propensity to buy private labels

Each chapter to follow contains the same heading layout as above, with data that is specific for that country. CHAPTER 11: PRIVATE LABEL IN FRANCE (29 PAGES) CHAPTER 12: PRIVATE LABEL IN GERMANY (30 PAGES)

CHAPTER 13: PRIVATE LABEL IN ITALY (30 PAGES) CHAPTER 14: PRIVATE LABEL IN THE NETHERLANDS (29 PAGES) CHAPTER 15: PRIVATE LABEL IN SPAIN (29 PAGES)

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Sample Information
Chapter 16: Private Label in Sweden
Overall private label attractiveness matrix: food, drink and personal care
Brand opportunity 40 Frozen vegetables 35 Jams 30 Cooking fats & oils Brand hell Lemonades

Frozen fish

25

Pasta Sparkling mineral water

20

Frozen meat Breakfast cereals Ketchups Spaghetti sauce Instant coffee Still mineral water

15

10

Other flavored carbonates Sanitary panty liners Drinking chocolate Mayonnaise Sanitary pads Frozen Margarine & spreads pizzas Frozen ready meals Cooking sauces Toilet Diapers Tea Coffee soap Plain & savory biscuits Toothbrushes Toothpaste Processed cheese Deodorants Liquid soap Salad dressings Shower & bath Shampoo Hair additives Tinned soups conditioners Soft cheese Yogurt Beer Packet soups Low PL attractiveness Brand heaven Ice cream

Potato crisps Colas

Tampons

Brand hell The majority of categories are located in the bottom half of the Swedish attractiveness matrix (as some outliers impact the average level to be relatively high). In brand hell we find four drinks categories and five food categories: private label lemonade is the most firmly placed in this quadrant with high value share and high attractiveness. Private label lemonade held a value share of 30.6% and volume share of 50.5% in 2003, representing growth of 13.8% and 20.0% respectively. Penetration also grew from 51.2% to 66.3% as brands faced increasing domination by private labels. Unlike the majority of European countries, tinned products do not appear in brand hell. Brand threat None of the categories in brand threat have an extremely high private label attractiveness. However, private label toilet soap does hold some attractiveness to Swedish consumers

PL value share (%)

High Brand threat

and private label value and volume shares are growing, albeit slowly. The same is true for private label mayonnaise, therefore these two categories should be worried about losing share points to private labels. Brand opportunity A mix of personal care, drinks and food categories offer brand opportunities in Sweden thanks to lower attractiveness levels for private label variants. Private label pasta, for example, has an above average value share of 19.9% that grew by a substantial 9.7% between 2000 and 2003. Private Label volume share is higher at 28.1%, which grew by 8.2%. However, brand premiums fell to just 15% by 2003, giving private labels less opportunity to trade on price. Unless retailers manage to increase the attractivity of price labels, brands have an opportunity to build on the low private label attractiveness and capture a greater market share. Brand heaven Brand heaven is dominated by personal care categories, which are not associated with retailers' own brands. Swedish consumers are prepared to pay a premium for branded products. Branded shampoo for example has a premium of 107% over private label equivalents and is firmly placed in brand heaven (with low private label value share and private label attractiveness). It is immediately obvious that each of the countries holds a unique private label picture. Germany for example has a retail market dominated by hard discounters producing low price products and offering intense competition to branded manufacturers. The UK is also a successful private label environment but for different reasons, while hard discounters are starting to make their mark in the country, price premiums remain lower than in Germany and it is premium private label that is driving value and volume growth. To compare these countries' private label success, a ranking system has been devised to set them apart. Five key factors, taken from within the report, were put together to assess how each of these countries is affected by private labels and to understand growth potential: The average food and drink private label value share. The average personal care private label value share. The average food and drink price index (premium of brands over private labels).

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