The rise
of Private
Label

Private labels surge
as shoppers
pivot for pennies

The Fast-Moving Consumer Goods industry is, as ever, evolving. This time, the movement is a noticeable swing towards private label (PL) products. It’s not that brands haven’t also grown, but it has been a humble increase from 3% to 3.7% in growth. By contrast, private labels have carved an impressive trajectory, with a nine-fold growth in 2022 compared to the previous year.Currently, private labels account for nearly 22% of the global spend, marking a bounce back from a minor drop to 21.1% in 2021.

Across all major modern trade channels, private label products are surging ahead of brands. Notably, the largest gains have been observed in super/hypermarkets and convenience channels, with PL gaining 0.8% and 1% share, respectively. At the same time, brands actually faired comparatively well in the discounters with their highest growth across channels.Share gains and channel impact PL's outperformance across all trade channels has resulted in significant share gains across the FMCG industry. But discounters remain PL's stronghold, commanding over 50% of market share, while brands dominate the online channel with an 87% share in 2022.

Private labels have carved an impressive trajectory, with a nine-fold growth in 2022 compared to the previous year.While the success of PL can be partly attributed to the rapid growth of discounters, it is essential to note that 68% of PL growth originated from outside this channel. A significant proportion of PL growth stemmed from super/hypermarkets, highlighting their influence.

Brands also benefitted on the acceleration of discounters, contributing 14% to their growth, while e-commerce remained pivotal, accounting for 17% of brand growth.Consistency across regions The story of PL's success remains consistent across regions, with gains observed in most markets. Europe is the key region for PL, fuelled by the importance and growth of the discount channel but not limited to it as already seen. According to Europanel data from the Big 6 European markets – France, Germany, Great Britain, Italy, the Netherlands, and Spain – the growth can also be attributed to two other factors: firstly, higher-than-average price rises, accounting for over half the rise in private label value share. And the final piece of the puzzle is the migration of shoppers from brands, explaining just over a quarter of the growth.In Asia, PL's presence is limited, while Latin America still heavily favours brands, accounting for 95% of FMCG spend.

France stands out as the only European market where PL did not gain share, contrasting with double-digit growth in fourteen markets and 30%+ share in fifteen markets. Colombia and the United States are the only non-European markets featuring in the top 20 biggest PL markets globally. Despite seeing +21% and +7% growth respectively, PL captures less than one-quarter of FMCG spend in both remaining comparatively lower than many European markets.

Which FMCG categories do you think are most at risk of decline or abandonment by shoppers in the next year?

Non-essential luxury goods, as consumers prioritise basic needs and affordability.
High-end beauty and personal care products, due to an increased focus on value-for-money options.
Premium food and beverage products, as consumers may opt for more affordable alternatives.
Organic foods, as consumers look for cheaper options.

Discounter delightThe plot thickens as we delve into the British grocery market, where private label has the second-highest share and PL sales in actual terms are greater than anywhere else in Europe. While standard PL products dominate in terms of share, the value and premium tiers of retailer brands are gaining traction. Consumers are increasingly embracing a wider variety of PL options, driving the growth of PL in Great Britain.

Economic conditions have incited a behavioural shift among consumers towards discounters and private labels, altering the retail market dynamics. Amid the rising cost of living, shoppers are increasingly leaning towards private label products, yet the beneficiaries of this trend are not uniform across the board.Aldi and Lidl, the discounters renowned for their low prices and robust private label portfolios continue their winning streak. They do so as the share of private label products in the total market, which spiked from 49.6% in May 2021 to 51.2% in May 2023, further swelled to 52.6% in the four weeks leading to mid-May 2023. These figures stand as testament to a consumer-driven push for affordability in a high-priced world.The focus on private label by Aldi and Lidl has seen them lift their percentage of private label sales from 86.5% in May 2021 to 87.8% in May 2023. They do so while concurrently expanding their share of private label spending and volume. Their piece of the private label spending pie leapt from 21.3% in May 2021 to 26.7% in May 2023.However, this private label growth story casts a contrasting shadow over other retailers, including the UK's traditional Big Four: Tesco, Sainsburys, Asda, and Morrisons. Despite an increase in their private label sales, they trail behind Aldi and Lidl in securing consumer spending and escalating volume growth. They now find themselves in a tight spot, their share of the private label market dwindling, and face a formidable task: competing effectively with the burgeoning might of discounters.This unfolding drama within the UK's CPG industry emphasises the potency of economic pressures in shaping consumer behaviour.