Trust is earned, not given. It takes time to earn trust, and consumers' loyalty to private-label brands is no exception. As such, private-label dollar share tends to be highest in regions that have allowed it to mature and develop.
Case in point, private label is most developed in Europe, particularly in the western markets. In fact, private label accounts for $1 of every $3 spent in the consumer packaged goods (CPG) market across all of Europe. Both regionally and worldwide, Switzerland has the highest private-label dollar share at 45%, followed closely by the U.K. and Spain at 41% each. Private level is less developed, however, in eastern and central Europe, where share varies greatly from a high of 24% in Poland to a low of 5% in Ukraine.
Perceptions of private label are overwhelmingly positive in Europe, with 70% of respondents in a recent Nielsen global survey saying that private label is a good alternative to name brands and 69% indicating that private label offers good value for the money. Only one-third (33%) believe private label is not reliable when quality matters.
Though regional acceptance of private label varies around the world, Europe provides a strong model for how retailers can successfully develop and grow private-label brands. The region's successful private-label retailers have invested in brand management activities like those of their manufacturer peers, building significant brand equity and recognition for their products by providing value with standard and premium offerings for consumers at all price points. Importantly, they are also innovating to address unmet consumer needs.
An important truth also emerges in the region, where we see that success in private label does not represent the demise of name brands. Share of basket for even the heaviest private-label buyers hits a tipping point around 50%, and the most developed markets are at saturation levels. Private-label share in global leaders, Switzerland and the U.K., has remained around 45% for the past 10 years.
“Private label by nature is not predestined to grow; name brands have the growth advantage,” said Jean-Jacques Vandenheede, director of retail industry insight, Nielsen. “Commitment to innovation, analytics and marketing are effective strategies for maintaining and growing share.”
So price is not an irresistible differentiator. Psychological factors can be immensely powerful. Shoppers will not compromise in some categories. For example, private label has not made a sizeable impact in the health and beauty category despite a price advantage of approximately 40%. Moreover, even in the hardest of times, consumers crave occasional indulgences, and they will pay a premium for their favorite brands.
On the other side of the ocean, North American private label is just above the average global share of 16.5%, with dollar shares of 17.5% in the U.S. and 18.4% in Canada. Since the recession ended, growth of private label in the U.S. has been fairly flat because name-brands have stepped up both promotional activity and innovation efforts to protect share positions and drive growth. As a result, the country's private-label share increased only 1.3 percentage points between 2009 and 2013. In Canada, private-label share has also been stagnant, with shoppers increasingly turning to promotions to save and national brands driving more sales through savvy pricing strategies.
Despite the lack of recent growth, the majority of shoppers are pleased with private-label products, calling them a good alternative to name brands (75% of Americans, 73% of Canadians), a good value (74% of Americans, 66% of Canadians) and at parity with name brands on quality (67% of Americans, 61% of Canadians).
“To drive increased private-label growth, retailer focus and commitment will be critical,” said Todd Hale, former senior vice president and current consultant, consumer and shopper insights, Nielsen. “Best-of-breed retailers win by using a combination of organizational focus and operational excellence and by ensuring they offer the right product at the right price to deliver the right margin across the store in their given categories. Ultimately, retailers must understand shoppers’ demand for both private-label and name-brand products and categories.”
The report also discusses:
For more detail and insight, download Nielsen’s Global Private Label Survey.
The findings in this survey are based on respondents with online access across 60 countries. While an online survey methodology allows for tremendous scale and global reach, it provides a perspective only on the habits of existing Internet users, not total populations. In developing markets where online penetration has not reached majority potential, audiences may be younger and more affluent than the general population of that country. Additionally, survey responses are based on claimed behavior, rather than actual metered data.