Daily Research News Online no. 2620 - Growth of Private Label Sales

Growth of Private Label Sales

September 23 2003

Sales of private label goods, defined as any Consumer Packaged Goods brand that is sold exclusively by a specific retailer or chain, are growing relative to manufacturer brands according to recent research by ACNielsen. More than 95% of Private Label sales are found in Europe and North America but growth is fastest in other regions.

Europe has the largest Private Label share of total retail sales at 22%, with North America second at 16% according to the study, which is based on ACNielsen sales data and entitled The Power of Private Label - A Review of Growth Trends Around the World. In the 36 countries and 80 categories studied, the mean is 15%. Switzerland has the highest Private Label share at 38%, and the US remains the largest single market for Private Label sales in absolute dollars even when Wal*Mart's Private Label sales are excluded.

In Latin America, Asia Pacific and the Emerging Markets, Private Label sales have a very small share but this is growing rapidly. Increase in Private Label sales vs 2002 ranges from a mean 48% in the 'emerging markets' of the Czech Republic, Hungary, Poland and South Africa to 16% in Latin America and 14% in Asia Pacific. In Europe the figure was 6% with little or no change in the US. Growth rates for Private Label products outpaced those of manufacturers in nearly two-thirds of the countries studied (22 of 36).

'The high growth rates for Private Label in the developing markets are directly related to the expansion of global retailers beyond their traditional geographic borders. As they build infrastructure, they build their Private Label brands', according to Jane Perrin, ACNielsen MD of Global Services.

Some products viewed as commodities are traditionally strong areas for Private Label - for example Paper Products, Plastic Bags and Wraps. 46% of Aluminum Foil sales, 33% of Plastic Wrap/Rolls and 32% of Kitchen Paper/Towels were Private Label. In the food sector, Complete Ready Meals have a 51% Private Label share, and Private Label Milk 44%.

Premium 'branded' Private Label products are a growth area - sometimes with the retailer's name and sometimes with a brand image all of their own. This is helping Private Label to break into areas previously considered the preserve of manufacturers' brands, such as beauty products and baby food, where 'trust' according to Perrin, 'is a vital element to success. Private Label's growth in these areas shows that retailers are marketing effectively to consumers beyond the simple 'low-cost, high-volume' approach of the past'.

Chart 1 - Top Ten Fastest Growing Private Label Categories

	Category	Private Label Share %	Private Label Growth %	Manufacturer Growth %
1	Drinking Yogurt	8	38	17
2	Sports Energy Drinks	6	33	9
3	Lipstick/Gloss	2	26	2
4	Facial Cleansing	6	21	6
5	Baby Food	1	20	2
6	Face Moisturizers	2	20	10
7	Complete Ready Meals	51	20	13
8	Eye Shadow	3	19	2
9	Cooking Oil	21	16	7
10	Flavored Milk Drinks	14	13	4

On average, Private Label products were 31% cheaper than their manufacturer counterparts. This ranges from 50% in Poland to 10% in Hong Kong. The differential is generally high in Europe, and average in the US.

At the category level, the difference ranges from Personal Care and Health Care products like Private Label Pain Relief (55% cheaper) to food categories like Frozen Fish (including Shellfish and Seafood) with less than 10% difference.

Where Private Label prices are actually higher than manufacturer branded products, this is generally due to the offering of a 'premium' private label option, sale of imported goods under private label or price promotions by the manufacturers.

Perrin sums up by saying that Private Label's growth will continue with the spread of major retailers and their growing sophistication as marketers. 'While the role of 'low price - high volume' for Private Label will always exist, retailers will also continue to build on the power of Private Label by offering even more premium priced, higher quality products. Manufacturers of branded products will see Private Label as a growing competitive threat in the global marketplace'.

The 36 countries represent 65% of the world's Gross Domestic Product. A representative sample of 80 product categories was selected for review, chosen to provide a cross-section of Private Label activity across product types. Data was collected for the 12-month periods ending in April 2001, 2002 and 2003.

Countries included were: Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Czech Republic, Denmark, Finland, France, Germany, Great Britain, Greece, Hong Kong, China, Hungary, Ireland, Italy, Japan, Korea, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Puerto Rico, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, USA

More detail on The Power of Private Label - A Review of Growth Trends Around the World is available from ACNielsen's Web site - see www.acnielsen.com/news

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.