The Big Read ‘Private label’ stands up to the big brands
Retailers order up more goods with their own, or no, branding
● For many consumers, before there was petroleum jelly there was Vaseline, and before there was washing powder there was Omo. But as brand recognition becomes a non-factor when looking for value, private-label and no-name brands are occupying greater shelf space in supermarkets.
In 2017 the fast-moving consumer goods privatelabel market was worth about R43-billion, up 9.5% across a basket of goods from the year before, according to a Nielsen private label report.
Gareth Paterson, head of retailer services at Nielsen South Africa, said: “There is an expectation of good growth within private label due to a number of factors, including private labels becoming more trusted value-for-money offerings, an increase in quality, as well as key retailers having a key focus on increasing private-label offerings across categories.”
Paterson said as a result of this growth, privatelabel items had placed pressure on suppliers of branded products. “Private label is growing ahead of many of the branded label products, albeit in many cases private label is coming off a smaller base.”
Private-label products are supplied to a retailer either with the retailer’s branding or under a different brand name — one found only in that retailer’s stores.
Last year, the largest retailer in Africa, Shoprite, introduced almost 500 new private-label products, of which 17 are its own label.
Private label accounts for 15.4% of Shoprite’s total sales volume, compared to the current share of 20% for private label in the market.
Pick n Pay CEO Richard Brasher said that in the next few years he expected almost a third of Pick n Pay’s in-store products to be private label. “The progress we’ve made on the Pick n Pay brand over the last few years allows us to sell a great product, well presented at lower prices and higher margins than maybe sometimes the branded equivalent.”
He added that the diversification of products “keeps everybody honest. We can give people better value for money with our brands because it’s the name above the door, so we don’t have to advertise these products all the time.”
While advertising — of branded products or the odd private-label offering — still makes up its share of retailers’ costs, this shrank last year. In the year to January, advertising spend fell 12% year on year to R22-billion from R25.2-billion in the same period last year, according a Nielsen report on advertising spend.
Shoprite was the largest contributor to ad spend at R1.4-billion. Another consumer-facing brand, Unilever, spent R918-million, with Coca-Cola paying R614-million and Pick n Pay spending R600million for the same period.
As retailers gain traction in the private-label segment of the market, it is clear there is room for suppliers to produce quality, innovative products at scale. In fact, one of the most successful retailers in South Africa has built its business largely on private label.
Susie Squire, Woolworths group head of communications, said being a private-label business had been a core competitive advantage for Woolworths.
“As a private-label retailer, we source products from a number of suppliers who manufacture products on our behalf. As a retailer, we take full responsibility with our suppliers for the products that we sell and therefore customers come back to Woolies for recourse, if required,” she said.
Over 92% of Woolworths Foods and 53% of its fashion, beauty and home merchandise is sourced from within the Southern African Development Community.
“This is aligned to our strategy of becoming a bigger foods business and makes it more convenient to shop at Woolies. The vast majority of the products we sell are our private-label product,” said Squire.
Shoprite’s suppliers include large brands and smaller-scale suppliers that provide only private-label items.
“Although we prioritise local procurement, we look at various factors, including quality, price and volumes required,” a Shoprite spokesman said.
Paterson said it was unlikely that private label would ever account for 100% of goods sold in South Africa. “There are many large suppliers within the country that continually innovate, and provide traditionally trusted, quality brands.”
Household brands produced by Unilever, Pioneer Foods and Tiger Brands are likely to remain mainstays, but may have to compete for shelf space with products that create value for consumers.
Would Brasher consider a complete private-label offering? “Not for Pick n Pay,” he said.
“I see them as being complementary, I don’t see us becoming a Marks & Spencer, Aldi or even a Woolworths because we are Pick n Pay and a large proportion of the population love brands — but I also think that they love the Pick n Pay brand.”
We can give better value with our brands because it’s the name above the door — we don’t have to advertise all the time Richard Brasher Pick n Pay CEO
With brand recognition becoming less of a factor in determining shopping choices, private label brands are taking up more shelf space as shoppers look for value for money.