The FINANCIAL — When money is tight, private-label brands, also known as store brands, have a potential advantage over national brands as shoppers seek value and become more receptive to lower-priced alternatives. Today, private-label products account for roughly 16 percent of global fast-moving consumer goods (FMCG) dollar share, according to Nielsen’s 2011 Global Private Label Report.
Private-label dollar share varies dramatically around the world, as the availability of private-label brands are typically found across larger retail formats, referred to globally as modern trade outlets, which dominate the retail landscape in the developed world. For example, private-label constitutes 46 percent of FMCG dollar share in Switzerland, but only 1 percent in China, according to the report. But conditions are ripe for private label growth within the heavily urban settings of developing countries, as the spread of modern retail is poised to usher in a host of private-label brands and new opportunities.
Urban India’s rapid expansion is a case in point. Nielsen estimates that FMCG sales will more than double through modern trade channels from $1.8 billion today to $5 billion in 2015. While modern trade channels account for only 5 percent of the Indian retail landscape today—and 6 percent of sales nationally (9% in urban India)—sales growth is already twice that of traditional trade. And sales of private label are reaping the rewards, as sales grew 22 percent in 2012 from 2011.
"Indian shoppers who are more sensitive to price typically toggle between packaged and loose alternatives for commodities like wheat, rice and sugar during inflationary times,” said Adrian Terron, vice president, Nielsen India. “Private label offers consumers a tolerable down-trade zone since it assures them quality, the retailer's assurance, and the comfort of a recognizable origin. Private-label brands’ lower price and quality characteristics can prove a useful combination for shoppers who do not want to revert to unbranded and unpackaged alternatives even during tougher times,” he added.
In regions where private label is well established, results from the Nielsen Global Survey of Inflation Impact showed the potential power of private label brands during inflationary times. In North America, almost half (46%) of respondents said they would shop more for private-label brands when food prices rise, compared with only 7 percent that would increase shopping frequency for national brands. Similarly, in developed European countries, 35 percent would shop more for private-label brands, compared with only 8 percent that would buy more national brands.
The price must be right and marketing must be effective for private-label brands to be successful. Packaging affects trust and quality perceptions especially when private labels extend beyond commodity or low-risk product categories.
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