Pub­lic goes pri­vate

Financial Mail - - SHOP TALK - @zeenat­moorad [email protected] by Zeenat Moorad

In SA, penny-pinch­ing shop­pers look­ing to economise have al­ways had a ten­dency to rely on the rep­u­ta­tional strength and good­will of a branded prod­uct — with pri­vate la­bels in­spir­ing less trust. Pri­vate la­bels, also known as house or store brands, ac­count for about a quar­ter of the food that is sold through modern food re­tail world­wide. But lo­cally they’ve of­ten been per­ceived as be­ing a generic no-frills or in­fe­ri­orqual­ity op­tion.

This is chang­ing.

Nielsen says sales of pri­vate-la­bel prod­ucts in SA now equate to R49.3bn an­nu­ally and the sec­tor com­mands a healthy 21.1% share of the SA re­tail sec­tor, up from 20% in 2017, and (this is the im­por­tant bit) ahead of branded prod­uct growth in the coun­try.

“Pri­vate la­bel” is de­fined as prod­ucts that are sold ex­clu­sively by a spe­cific re­tailer or chain of stores and in­cludes store brands, which fea­ture a re­tailer’s own brand­ing.

All SA’S gro­cers have their own ver­sions.

They’re a boon for re­tail­ers as they gen­er­ate higher aver­age price mar­gins be­cause they re­quire min­i­mal ad­ver­tis­ing ex­pen­di­ture, lower re­search and de­vel­op­ment costs and, usu­ally, re­duced pack­ag­ing costs.

Lo­cally, we tend to rely on the good-bet­ter-best ar­chi­tec­ture for pri­vate la­bel: a value or cheaper al­ter­na­tive, a stan­dard-priced al­ter­na­tive and a premium or more ex­pen­sive pri­vate la­bel.

The 2018 Nielsen Shop­per Trends re­port found that 77% of lo­cal shop­pers claim to com­pare the prices of store brands with lead­ing man­u­fac­turer brands and most con­sumers say they buy pri­vate-la­bel prod­ucts be­cause they are cheaper.

The value-for-money propo­si­tion of pri­vate la­bel is also now seen to be a ma­jor fac­tor in its pop­u­lar­ity. Over­all, the qual­ity of prod­ucts is seen to be im­prov­ing and there is an in­crease in the num­ber of peo­ple rec­om­mend­ing them.

Just out of in­ter­est, the top pri­vate­la­bel cat­e­gory re­mains long-life milk, with fresh chicken in sec­ond place.

One of the big­gest movers has been pre­pared foods, which has jumped from No 12 to third in line with a big trend in SA to­wards con­ve­nience op­tions and the de­sire to re­duce food prep times.

Sugar has also moved up from eighth to fifth po­si­tion, while but­ter has moved from 10th to fourth on the top cat­e­gory rank­ing. Given the in­crease in prices in sugar and but­ter alike, pri­vate la­bel seems to be a more vi­able op­tion for con­sumers in these cat­e­gories.

It must be said that in SA, pen­e­tra­tion lev­els of pri­vate-la­bel or own­la­bel prod­ucts — as they’re also known — are still rel­a­tively low com­pared with Europe or other de­vel­oped mar­kets. The sec­tor is worth £56.8bn in the UK, where gro­cers have all but made an art of sell­ing good-qual­ity pri­vate-la­bel goods at at­trac­tive prices.

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‘I don’t like la­bels’

Some­thing that was also no­table in Nielsen’s study was that when it came to the de­mo­graphic pro­file of SA con­sumers choos­ing to buy pri­vate-la­bel goods, 55% of sales cur­rently come from LSM 7-10, but the growth driver in 2018 has been the mid­dle LSMS, which have con­trib­uted ap­prox­i­mately 30% of sales.

Gareth Pater­son, Nielsen SA re­tail lead, says lower LSMS have also shown that they are now will­ing to try pri­vate la­bel within cer­tain sta­ple cat­e­gories like maize, com­pared with years gone by, when trusted brands were pre­ferred and mak­ing the switch was not an op­tion.

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