Public goes private
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.
‘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.