UK heads the way in European private label market

By Simon Pitman

- Last updated on GMT

The latest survey of the global private label market reveals a €100
billion industry that is increasingly seen as a sign of good
quality, good value food products. But it is Europe, and in
particular the UK, where acceptance and the development of own
label foods has been optimised.

According to the twice-yearly AC Nielsen​ survey two thirds of global consumers consider private label or supermarket own brands to be a good alternative - a figure that was even more pronounced in the more developed market of North America and Western Europe, where as many as 4 out of 5 respondents agreed with this.

However, the survey also revealed that own labels are not so well received in developing markets. In particular consumers in the Asia Pacific region appear least happy to buy own labels, with around half of respondents agreeing that they are a good alternative.

The survey, which questioned 21,100 respondents from 38 countries in Europe, Asia Pacific, North America, Latin America and South Africa, asked for opinions on quality, value for money, packaging and positioning. Evidently the more developed markets showed less acceptance of private labels, reflecting greater trust in major brands.

There are a number of reasons for this, but mainly it is due to the fact that in the developing markets private labels are not as established, meaning that consumer acceptance is still has some way to go.

However, there are cultural reasons for this too. In the Asia Pacific region, for example, consumers tend to be more brand focused and are more likely to pay a premium for a developed brand they know and associate with higher quality.

Of the top ranked supermarket labels in the survey, the most trusted were those private labels found in European supermarkets. In the Netherlands 91 per cent of respondents said they trusted own labels, compared to 35 per cent of consumers in Malaysia.

In the UK the market for private labels first started to take off in the 1970s. Originally it served as a means of providing consumers with cheap every day food and homecare products. The idea was that supermarkets would cut down on distribution as well as sales and marketing costs, passing on the savings to consumers.

Now the industry in the UK is work €38 billion, making it by far the largest in the world. But to reach this stage the market has come a long way. Simple packaging concepts and lower prices are still the order of the day, but through product development many premium labels have come to represent premium quality.

Leading the way in the UK are both Marks & Spencer and Tesco. Indeed Marks & Spencer food products are consistently given top marks by consumers for quality, a fact that was endorsed by another AC Nielsen survey that gave the supermarket brand the best rating for overall quality earlier this year.

Tesco has done much to develop its private label ranges, which, unlike Marks & Spencer, compete alongside other established brands. Its 'Value' label provides British food staples such as eggs, bread and baked beans at competitive prices, whereas its 'Finest' range features foods containing higher quality ingredients which lends the label its premium positioning.

Moves such as this have helped to give premium labels a greater association with quality - an issue that has hampered often the development of the category. In turn the more sophisticated state of the private label sector in Western Europe and the US has contributed to the clear division between the perception of the category there and its perception in developing markets.

However, the report also indicates that consumers perception of own label products is still hampering the introduction of certain food products in all markets, although this is less of problem in the developed markets.

Frank Martell, CEO of AC Nielsen Europe, pointed out that when it comes to products such as dog food and every day ingredients such as flour, butter and sugar, consumers are generally happy with the quality. However, he also pointed out that when it came to products such as baby food or pasta sauces, consumers were less likely to take private label products, a trend that is more pronounced in the developing markets.

With the growth of private labels still roaring ahead in the UK, the indications are that as consumers perceptions of quality continue to change, strong growth and the increasing sophistication of own labels looks set to spread world-wide.

Related topics: Market Trends

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