Private label: emerging trends to consider in 2023

di Claudia Scorza

An increase in consumer awareness and shifts in the marketplace have witnessed the average buyer become more mindful of how they spend their money and engage with brands.

The proliferation of PL products in large-scale distribution shows no signs of slowing in 2023. An increase in consumer awareness and shifts in the marketplace have witnessed the average buyer become more mindful of how they spend their money and engage with brands. A US study conducted in December revealed that roughly 60% of shoppers believe that PL products are as good as national brands when it comes to quality, innovation, sustainability, and trust. According to IRI, a quarter of shoppers feel that distributor brands still hold these characteristics more than national brands, which shows a significant shift in opinion compared to previous performance periods. The same can also be said when considering sales. For example, private sales in Italy reached an all-time high of 12.8 billion euros in 2022, an increase of 9.4% on a yearly basis. Similar trends were reported in Britain, Spain, Germany, and the Netherlands. Considering this, ESM (European Supermarket Magazine) examined eight private label trends to watch out for in 2023.

CONSUMERS ARE BECOMING ‘AGNOSTIC’

A 2022 study by Daymon revealed that retailers must update their private-label innovation strategies or risk falling behind competitors in an increasingly complex and changing environment. When facing today's challenges, consumers are becoming ‘agnostic,’ and supermarkets should aim to create a groundbreaking business model when it comes to private labelling, rather than taking a blanket approach.

Pricing Strategy Underway

In early 2023, Walmart began marketing its private label products to shoppers as lower-cost alternatives to traditional suppliers, warning major packaged goods manufacturers that their price increases would no longer be acceptable. As a result, supermarkets must strike a balance between premium quality and competitive prices.

The Importance Of Finding A Niche

See a problem and find a solution. Though it may sound simple, many supermarkets make the mistake of launching products into a market that is already saturated. Unfulfilled needs create unfulfilled demands.

Private Label Allied To Fight Inflation

During previous financially challenging periods, such as the 2008 recession and the years that followed, private label sales increased dramatically. The Private Label Manufacturers Association (PLMA) claims that one of the key reasons for the rising figures in private label penetration in the United States in 2022 was that store brands were embraced by American shoppers as a "reliable ally" against the persistent inflation and other personal financial difficulties. Interestingly, shoppers across the country reported a high level of satisfaction with the branded products they purchased for the first time in some categories, adding that they would continue to purchase them.

Pl Purchases Will Continue

Despite inflation, recession fears, supply chain prob lems, and geopolitical unrest, consumers have been able to continue to buy high-quality food and non-food products by adapting to making smarter purchases, as PLMA recently reported. We have every reason to believe that this beneficial dynamic will persist in 2023.

Price War

There are indications that once the current spell of high inflation ends, FMCG brand suppliers are likely to engage in extensive discount campaigns, which could affect PL performance. IRI has been suggesting that a price war is increasingly likely in 2023, as inflation levels normalize, and brands seek to win back market share.

ARE PRIVATE LABEL PRICES THE LOWEST?

According to Ananda Roy, SVP Global, strategic growth insights at IRI , PLs have generally been offering buyers the lowest prices. "However, these figures are not sustainable, and inflation has caused more significant price increases for PLs than well-known brands. This has not diminished demand levels, especially in chilled, fresh, ambient temperature, and frozen food categories, as well as in home and personal care categories."

Quality Will Decide

The trajectory that the private label market takes will depend on a customer consensus: not only that store brands offer great value in a challenging economy, but that their quality exceeds that of mainstream market brands. Trying times will push consumers toward private label products, however, quality will determine whether they remain in that particular segment. l

PL product prices rise in Portugal

A typical basket of private label products in Portugal has seen a 32% increase over the past year, while a similar basket of manufacturer-branded products has seena 13 percent increase. Despite the price growth, consumers continue to prefer PLs, according to a study by Deco Proteste . During the period from 1st January to 31st December 2022, the Portuguese consumer association monitored the price of 60 products on a daily basis. These products included 30 mid-range brand products, along with the same number of manufacturer-brand references, on the online stores of five supermarkets: Auchan, Continente, Intermarché, Minipreço and Pingo Doce. Over the course of 2022, the average price of most products rose well above the rate of inflation, while 23 of the 30 private label items witnessed relatively more significant price increases than their manufacturer-branded counterparts. According to Deco Proteste, in certain categories, the savings that shoppers made by purchasing private labels versus manufacturer's products were significant. For example, those who opted for the PL fusillo pasta shape at the beginning of 2022 saved an average of 48% compared to the manufacturer's brand equivalent, a difference that dropped to only 22% on 31st December. This is because the price of the manufacturer's brand decreased by 4% (from €1.32 to €1.27), while the price of the PL product increased by 44%, from €0.69 to €0.99.