With FMCG growing like never before did Private Label win or lose and did we see more or less promotions?
Early signs showed that the biggest brands were set to do well in 2020. This may still be the case and will be unveiled when we share our 2021 Brand Footprint report later this year. But in the total brand versus private label battle, the latter continued to steal share, albeit at a slower rate than previous years.
In Eastern Europe and the US, Private Label gained share across most months of the year. The result was a +0.3% share gain in the US and significant gains in Romania (+2.5%), Serbia (+2.2%) and Hungary (+1.9%), combined with a +0.6% gain in Russia. Although Private Label remains much lower in Latin America, it did see the biggest gain of any individual market with +3.5% in Colombia.
These gains for Private Label in Colombia and Eastern Europe are due to Discounters' growth. The channel gained +3.5% share in Colombia and grew at 25% in Eastern Europe.
In Western Europe, where Private Label is strongest, its share remained flat despite a strong start to the year, with brands winning the second half of the year. In the two biggest markets in the region, GB and Germany, Private Label lost 0.8% and 0.5% share. And again, the link to Discounters is at play here, with the channel losing share in both markets.
However, the performance of the Discounters is not always the main factor behind Private Label performance. Portugal, for example, saw the fourth-highest gain for Private Label (+2% share), driven by Supermarkets as the dominant and growing channel during 2020.
The Netherlands also saw a reduction in Private Label share last year, and alongside GB and Germany, joins three of only five markets globally where share is above 40%. Have we reached peak Private Label in the region, or were shoppers trading up to brands as a reward during COVID-19?
Promotions have been a key tool helping FMCG retailers and brands to grow. When done well, they encourage incremental growth through additional purchasing, which wouldn't ordinarily have happened.
However, as lockdowns increased demand for in-home groceries worldwide, retailers took advantage with the single biggest yearly reduction in promotion spend (-1.2% share) ever.
In Mexico, Spain, and France, this was a continuation of a trend already being seen. In France, for example, rules have been in place since the beginning of 2019 preventing food products from being discounted by more than 34%.
In GB and US, which in 2019 had the highest and third-highest levels of promotions globally, saw promotions share reduce by -2.5% and -5.3% in 2020. In GB, promotional sales were as low as 25% for a few weeks in April. This represented an 8% fall in share, as retailers benefitted from the increased demand during the early stages of lockdown.
Promotional spend was not down everywhere, with Chinese Mainland the significant exception. Promotions increased +1.9% in the region, and now represent 24.4% of spend in the market—up from 20.5% just two years earlier. This increase is due to ecommerce's growth in the region, which now represents 25% of FMCG spend. When looking at promotional spend online, it is 43.3% (v 18.2% offline).
For every 1% of FMCG spend that moves to ecommerce in Mainland China, promotional spend increases by +0.3%. This demonstrates the importance of promotions within this growing channel. Understanding incrementality will be key, particularly working out what works online versus offline.
Key takeaways
Private Label continued to gain share in 2020, albeit at a slower rate than previously. We predict that the economic climate will mean Private Label continues to gain from brands, particularly if many shoppers must look for savings at the till for the foreseeable future.
Promotions saw a reduction in importance as retailers took advantage of the yearly reduction in spend. They are likely to continue to reduce (or plateau) in markets such as France. Elsewhere, there will be some bounce-back as retailers use them to win shoppers, as the natural demand for in-home falls away as out-of-home food venues eventually reopen.
