In the first half of 2023, private labels will account for 34% of CPG-FLS sales in France, according to LSA and NielsenIQ1. In August 2023, private label sales volume increased by 4.2% year-on-year, according to Circana2. By contrast, sales of major national brands fell by 7.3%, a record gap in France. On the other side of the Channel, the situation is similar: at the beginning of the year, private labels accounted for 63.3% of sales in the UK, according to ESM3against 51.6% in 2022 according to Kantar4. At first glance, these are pessimistic figures for the major brands. But what are the real issues for consumers in relation to food brands in 2023?
Why are private labels so popular in 2023?
A bulwark against inflation
In September 2023, year-on-year food inflation in France was still 9.6%.5. Across the Channel, it was also 12.2%.6. In Germany, while the rise in food prices still exceeded the 7% mark in early autumn, it was showing the beginnings of a decline.7. Faced with this economic crisis, consumers are naturally turning to private labels. Indeed, several studies have shown that private label products cost on average between 20% and 30% less than national and international brands.8. For most consumers, choosing this type of food is a bulwark against inflation, enabling them to spend less while maintaining their habits. In fact, the gap between the sales volume of private labels and national brands is gradually widening in Europe. In France, it exceeded 11 points in the first half of 20232. In the UK, the gap was also 7 points last spring.9.
Several studies have shown that private label products cost on average between 20% and 30% less than national and international brands.
The shrinkflation phenomenon
While inflation encourages consumers to opt for private label products, shrinkflation increases this phenomenon even further. Derived from the English word shrink and inflation, shrinkflation is a "commercial practice consisting of concealing price increases by surreptitiously reducing the quantity of the product sold, usually without increasing the price on the label", as LSA points out.10. Faced with steadily rising raw material prices, many national brands have adopted this measure in recent months. By reducing the quantity of products sold, they assure consumers that their prices will not increase. However, several companies are not entirely transparent about this change, and retailers are not hesitating to denounce them on the subject.11.
Growing confidence in private labels
In addition to their attractive prices, private labels have also won the trust of consumers through their quality. In April 2022, a study by L'Observatoire des Nouvelles Consommations revealed that 31% of French people say they buy private label products, "because they offer more and more 'Origine France' references, or simply better quality for an equivalent budget". In fact, 38% of them consumed more than five years previously.12. Also, the brand image of private labels has improved for more than half of French consumers in recent years, encouraging them to opt more frequently for this type of product. On a European scale, a recent Circana report reveals that 60% of consumers consider private label products to be as good as those of major brands. In the UK, private labels account for 37% of the sales value of all food retailers.13. Similarly, 7 out of 10 Britons have turned to private labels in the last year and have no intention of changing this new consumption habit, according to a survey by Attest.14.
A recent Circana report reveals that 60% of consumers consider private label products to be just as good quality as those of major brands.
What about the major food brands?
Lower inflation
While the price of brand-name products is higher than that of private labels, their inflation rate is lower. In fact, since private label products are less expensive and offer greater margins, retailers have been more willing to accept price increases for them than for national brands.15. In France, a number of private-label brands have high inflation rates on certain product categories, such as sugars and sweeteners (23.7% vs. 21% for major brands), canned vegetables (15.9% vs. 11.6%), fruit juices (13.6% vs. 12.6%), sweet cookies (15.9% vs. 11.6%), and so on.16. In the UK, The Grocer notes that in the last 12 weeks of 2022, private label prices rose by 16.3%, compared with 9.8% for major brands.13.
Reassurance for consumers
Big brands are still highly prized by consumers, not least for their ability to reassure. In France, a Kantar study reveals that they provide shoppers with "reference points, comfort and reassurance".17. The report highlights their ability to reassure consumers and their price positioning, which remains competitive "thanks to greater promotional activity". In the UK, a YouGov survey shows that 29% of consumers prefer major brands, and 34% alternate between these and private labels.18. This statistic is supported by a study by Adobe Future of Marketing Research Serie, which reveals that 71% of British consumers regularly buy products from a brand that has earned their trust over time.19. In fact, the recent craze for private labels does not mean that their new customers are automatically loyal.
In the UK, a YouGov survey shows that 29% of consumers prefer major brands and 34% alternate between these and private labels.
Innovation-driven brands
Despite the price appeal of private labels, major brands remain the innovation leaders in their field. In its report, Kantar stresses that "theyare whetting consumers' appetites with innovations, while support for the private-label offer is declining after years of expanding assortments on store shelves".17. For good reason, a recent Nielsen IQ study reveals that nearly 70% of consumers worldwide appreciate innovative companies. In fact, 29% of them like to discover new products and brands before others, and 40% are constantly on the lookout for novelty.20.
"National brands are whetting consumers' appetites thanks to innovations, while support for private label offerings is in decline after years of assortment expansion on store shelves."
Conclusion
In 2023, food inflation will drive a large proportion of consumers towards private labels, which stand out for their generally lower prices. However, the ability of major food brands to reassure and innovate remains a key differentiator in their popularity with shoppers. Similarly, the inflation rate on their products remains lower than that of private labels in most categories. In the future, private labels may well retain a significant share of sales volumes. But the gap between them and the major brands is likely to narrow, thanks in part to consumers' attraction to trusted brands and novelty products.
.png)
