IRI recently reported that demand for supermarket private label products has been lagging but, with inflation rising and the big, branded product players considering passing on cost price increases to shoppers, the multiples could hold back retail prices of own brand products in some categories to increase share and sales growth.
The report also indicated that, during the pandemic, consumers had pivoted towards brands they know and trust in almost every category, even when own label and tertiary products have been competitively priced through discounts and promotions.
But there is another issue at play. We are increasingly aware of shortages of own label and tertiary products in certain categories, which is driving shoppers back towards branded products because they are, to some extent, the only choice open to them. When they can’t get what they want, shoppers will switch to what is available. And that means, almost by definition, if there is an absence of own brand products in a given category, this creates space for other brands to come in.
In some categories more than others own label products are struggling. In part, the problem for the supermarkets is being caused by the much-publicised ingredients and labour shortages. Price will continue to be a key issue too with the ongoing impact of inflation continuing to apply pressure. This has also put some multiples at a disadvantage compared with some of the bigger branded players, who may have the resources to better enable them to navigate this current situation; some having vertically integrated supply chains, with fewer ‘moving parts’, giving them greater control and ability to scale. These manufacturers may also have a greater level of insight than some of the multiples, having committed more resources to understanding the marketplace, meaning they may have foreseen the current issues and have been better prepared to navigate them as a result.
In many categories we are hearing those shortages of own label products may resolved in a matter of months; though, in others, we are told, it could take as long as a year. And this means there are opportunities for branded players to grab some share of the market from a private label. We would have ordinarily estimated there being a one in ten chance for a brand to be listed but now, dependent on the category, we think that could be as much as a five or six in ten chance.
But, to get listed, the really good ones will have to prove their relevance to the retailer’s customer base, to shoppers, that they’re right for the category and that they’re ready to go now. And the only way to do this is through shopper insights and through an ability to invest in shared growth and activation plans.