Many Consumers Have No Plans To Switch Back To Branded Goods
A new survey suggests that some brands might find it difficult to tempt back consumers who switched to private label during the cost of living crisis.
The EY Future Consumer Index (FCI), a survey of 23,000 consumers, 30 countries, found 28% bought private label in response to rising costs, a trend that appears to have become a sustained habit, with 66% finding the less expensive O/L satisfying their needs just as well as branded lines, with 38% having no plans to switch back.
NB the research shows this trend is not exclusive to mid- to lower-income bands. Higher-income consumers are planning to buy private label brands in the future, across every category: fresh food (60%), home and household care (56%), packaged food (52%), clothing, shoes and accessories (49%), personal care (49%), and beauty and cosmetics (39%).
According to the FCI, retailers are trying hard to capitalise on the opportunity by promoting private label aggressively – eye-level shelving and front-of-store placements – and increasing ranges.
Instead of branded products at a lesser price, they are offering a range of product options, analysing POS data to identify early trends, (strong position to respond to buying patterns and consumer needs). EY: the closer retailers get to the consumer, the more power they have to curate buying choices, and the more they can drive lasting loyalty.
Kristina Rogers, the firm’s Global Consumer Leader, said: “..many consumer products (CP) companies are focusing on volume recovery. Simplifying the portfolio, driving down costs and unlock resources are important, but this must happen alongside innovation and marketing – they need to keep their brands inside the consumer’s circle of trust to maintain their margins and fund growth agendas.
“For retailers, better data analytics capabilities will help them target and reach consumers. They can use retail media and loyalty programs to incentivise private label purchases and create alternative revenue streams by promoting their partner brands.
CP companies will need to take a balanced approach – promoting their brands to meet today’s goals, while also pursuing ways to keep these new consumers and earn their loyalty. Innovative new products that differentiate from private label and which consumers find valuable will be key to their future success.”
NamNews Implications:
* The brand nightmare:!
* Consumer-switchers found these less expensive alternatives satisfying their needs just as well as branded lines
* Retailers need to maintain a high level of consumer trust
* (by delivering more than it says on the tin, every time)
* whilst brands, the damage already having been done,
* ..have to either drop prices to a point that minimises the difference..
* or develop the potential of Retail Media to a point…
* … where the retailer has more to gain from the brand, than from their own label alternative…
BrandCompetitiveEdge
The CEO of Tesco has revealed that the retailer is targeting an extra £1bn in sales for its Finest own-label range to meet growing demand for premium food & drink and challenge the likes of Waitrose and M&S.
Finest currently has annual sales of £2bn. Speaking to the Financial Times, Ken Murphy said: “We haven’t yet set our stall out to say ‘what would it take to get to £3bn’, but we’re very conscious it is playing an increasingly important role.”
He added: “We genuinely believe . . . that our intrinsic [food] qualities are every bit as good as anything you would get at Sainsbury’s and increasingly out of Waitrose … M&S, we probably still have a bit of work to do.”
The report notes that in the face of higher living costs, shoppers are shunning restaurants and becoming more adventurous with their cooking at home.
Data from Kantar shows that spending on premium own-label lines in the leading UK supermarkets rose 12% in the year to 9 June even as inflation eased. The figure was also nearly double the 6.9% growth in all brands owned by the grocers, including their budget ranges.
The FT highlighted that Tesco’s Finest products account for only over 3% of the group’s £61.4bn sales, although this is equivalent to about a quarter of Waitrose’s total sales and M&S’s food sales, respectively.
However, it has taken Tesco about a decade to reach the £2bn level from £1.4bn in sales in 2013. Murphy did not reveal whether there was a target date set for getting sales to £3bn, but Clive Black, a retail analyst at Shore Capital, told the FT that it would not be earlier than “the medium and long term before that number is reached” given that the industry’s annual growth is relatively modest.
NamNews Implications:
* ‘Shoppers are shunning restaurants and becoming more adventurous with their cooking at home…’
* …heightening consumer awareness of the difference made by quality ingredients…
* …and the home-cost of ingredients vs the price paid in hospitality.
* All potential threats to ‘eating out’ long term.
* Apart from increased savviness re branded equivalents in store.
One to watch…
hashtag#OwnLabel hashtag#Hospitality