PRIVATE LABEL 2007: US & EUROPE
EXECUTIVE OVERVIEW
OCTOBER 2007

IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This issue provides insights into private label trends across categories, channels and consumer segments. This free summary is also accessible via the GMA/FPA Web site at  http://www.gmabrands.com/publications/gmairi.cfm
 

INTRODUCTION
Most major CPG retailers in the U.S. and Europe view private label as a critical element of competitive differentiation strategies, yet private label development varies dramatically by country, market, retailer and category.

These differences can be partly explained by differing retail environments. Countries with a high retail concentration, for instance, tend to have high private label share. Dominant retailers have the brand equity and consumer loyalty to extend private label across categories, and the scale to gain required operational efficiencies.

Category dynamics also play a role. Categories with dominant brands and heavy brand investment in innovation, advertising and promotion typically have low private label share – illustrating brand manufacturers’ ability to impact private label opportunity.

This report explores private label trends across the U.S. and Europe and the key factors influencing private label development to lend insight into what both retailers and manufacturers can do to achieve their objectives with respect to private label while delivering against consumer needs.



 KEY FINDINGS

U.S. CPG private label share has plateaued. In the U.S., total private label share has been flat for several years, but sizable shifts have occurred at the category level, driven in large part by changes in merchandising levels, changes in pricing, and new product introductions

 

U.S. private label sales are concentrated. U.S. private label sales are concentrated among “heavy buyers” (roughly one-quarter drive half of sales) and within a small group of CPG categories (20% of categories drive 70% of sales); significant industry private label share growth will require penetration increases across an expanded category set

Private label share in the U.S. continues to significantly lag Europe. Private label share in several European countries, including Germany, the U.K., France and Spain exceeds U.S. share by 50% or more; higher retail concentration and a strong hard discounter presence contribute to higher share in Europe. However, several leading U.S. retailers have grown private label share to levels consistent with European counterparts

Private label’s discount vs manufacturer brands varies by country. Across Europe, private label is priced at a substantial discount to branded products, ranging from a low of 29% in Spain to a high of 53% in Italy. The pricing gap was smaller in countries where private label is most heavily-developed and where premium private label lines are well-established. The U.S. is an interesting exception: the 35% discount in the U.S. is consistent with countries having a much higher private label share

European retailer branding strategies are driving private label development. Sub-branding, typically tied to a banner umbrella brand, is a critical success factor among European private label share leaders; in addition to multi-tiered offerings (ie value, national brand equivalent, premium), retailers offer targeted niche lines, including health & wellness, kid-focused and ethical products. As similar strategies are increasingly leveraged in the U.S., private label share will likely break out of the current holding pattern



 

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Source: IRI's Times & Trends Reports
Information Resources, Inc. (IRI) is the world’s leading provider of enterprise market information solutions and services to the consumer packaged goods (CPG), retail, and healthcare industries.