Retailers will shift the focus of their private label strategies from price tiering – economy, standard and premium – with low-end products displayed at bottom shelves to shopper behavior, offering innovative products merchandised at gondola ends and inspiring shopper on their shopping missions.
Miloš Ryba, Head of Retail Strategic Projects at IGD Solutions, explores the growth of private label in Europe and the opportunities for retailers and suppliers.
The prominence of private label product has been growing across Europe in the last decade. Whilst the average private label penetration in Europe is around 28% in value, Switzerland, UK and Spain have the highest levels of penetration stretching to more than 40%. On the other end of the spectrum is Italy and Eastern European countries like Russia and Turkey where the penetration is still below 20%.
Ongoing private label growth in Europe
The most significant private label penetration has been reported in emerging markets like Greece and Turkey, but also in Scandinavian countries like Sweden and Norway, which is a contrast to that of products contracted in France and Switzerland.
What is driving the growth? Even though the maturity of retail markets plays a certain role in the opportunities for private label and potential growth rates, IGD sees one clear trend across all European markets. The increase in private label prominence has been driven by the growth of the discount channel, and there are several reasons for it. Discounters keep opening new stores and at the same time they are expanding their assortment where private label plays a key role. Discounters are able to react quickly to new shopper trends and shopper missions, they develop, test and launch new products faster than brand manufacturers, which gives them a competitive advantage. As a result, new fast-growing categories like food-to-go, ready meals, organic product consist predominantly of private label products. Last, but not least, challenged by discounters, other retailers aim to catch up in both the value as well as the product innovation which leads to a further increase in the private label penetration.
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