In the current economic climate private label has a unique opportunity to grow its market share, as Emma Reinhold reports
If you can keep your head when all about you are losing theirs could not be a better sentiment for the private label sector in the current global economic downturn. And as the opening words of Rudyard Kipling’s famous poem If advise, a cool head could offer private label manufacturers and retailers a unique opportunity to increase their market share.
“Traditionally, own label was very much seen as the me-too cheaper alternative to branded products but in recent years, we've seen some great innovations coming from own label which seek to set the trends rather than just following them,” explains Alexandra Richmond, senior analyst, beauty and personal care, Mintel. Looking at own label in its widest sense, she adds: “Avon is a great example of this with its Dial a glow Adjustable anti-ageing moisturiser. And the Boots Expert range and No7’s Protect & Perfect have really broken the mould.”
The last 12 months have seen a huge shift on the global economic stage and the recession that has hit developed countries is forcing consumers to rethink their purchasing habits, bringing private label to a new consumer group. Euromonitor International says that consumer uncertainty about the economy and personal finances means consumers are seeking value for money in everything they purchase and this is expected to help private label’s market share advance faster than expected.
“The global economic downturn is changing the retail landscape in Europe and beyond,” adds Brian Sharoff, president of the Private Label Manufacturers Association (PLMA). “Consumers are paying more attention to discounters, and supermarkets and hypermarkets are fighting back on price. As consumers become more concerned with prices they naturally seek out products whose prices are most attractive. Value for money is now at the top of consumer shopping lists and that is always good news for private label. Retailers recognise however that even in a recession shoppers expect quality and assortment.”
Carrie Lennard, industry analyst at Euromonitor International agrees: “Attitudes are changing as people try and reign in their spending and cut costs,” she adds. “In Western Europe in particular, there is a real shift away from premium retailing towards discounters and supermarkets.”
But Sharoff is keen to point out that increased consumer price sensitivity does not equate to a lowering in consumer expectations over quality.
“It would be wrong to think that consumers are trading down in quality,” he continues. “Most retailers have committed themselves to making their private label products comparable or identical to better known brands.”
Europe’s deepest recession for over 50 years is also leading retailers to bring new strategies to market, according to the PLMA. Traditional retailers are making big investments in their private label programmes. Carrefour for instance now offers more than 20,000 food and non-food products under its own brands and Tesco added a new Discounter range last September, which includes a children’s toiletries range called Molly and Jack as well as skin care ranges. Tesco says 25% of its customers have tried the new range, which is positioned as an alternative to discount retailers such as Aldi and Lidl. Sainsbury’s meanwhile launched a campaign to highlight the money saving opportunities of its own label products. The Switch & Save campaign is said to have increased market share for own label products in recent months.
“Sainsbury’s Switch & Save campaign is a completely new way to market private label,” explains Oru Mohiuddan, company analyst Euromonitor International. “It moves private label very much into the mainstream.”
“As a percentage of own label beauty and personal care launches, ‘economy’ has typically held steady at less than 1% since 2001. However in the first four months of 2009 this has shot up dramatically to 6% of all launches,” says Richmond. “This is in direct response to a growing band of budget conscious consumers.” She cites Tesco’s Value Foam Bath, priced at 18p a litre, Asda’s Essential Care SPF (£2.93 for 200ml) and Boots’ Ingredients Shower Cream (£1.18 for 250ml) as examples.
PLAYING THE PRICE GAME
While price continues to be a dominant factor in purchasing decisions involving private label C&T products, fluctuations are beginning to emerge which are helping to distance some products’ move away from the budget label.
“Own label products are now available at a number of price points so they are no longer always associated with the budget end of the scale,” explains Richmond. “It offers people a touch of luxury at a more affordable price.” She cites direct seller Oriflame’s Cellular Anti-aging Cream (£29.95) and Aldi’s bargain £3.99 Lacura Face Care 7 Day Intensive Treatment as examples of both ends of the market.
However there are still some areas mostly in the commodity sectors, such as shampoos and bath and shower products, where consumers expect to pay less. “Commodity sectors have seen the biggest growth in recent years as it’s an area where consumers are happy to trade down,” adds Lennard. “They will cut corners where they can get away with it and not sacrifice on quality.”
THE GREEN SCENE
The natural and organic movement has been spearheaded by own label brands and, according to Mintel, launches have grown from a quarter of all own label C&T launches in 2005 to a third in 2007 and more than half in the first four months of 2009. Efficacy has come through as a serious demand by consumers who are looking for products that marry performance claims with natural and organic claims.
“We are constantly asked how to deliver product benefits in the natural and organic ranges we manufacture,” explains Sarah Fernihough, sales and business development director, Laleham Healthcare, whose clients include The Body Shop. “Consumers now have an understanding of preservative-free
so now it’s paraben-free that is being requested. The challenge for us is to find natural ingredients that deliver tangible benefits. At the end of the day the product has to deliver.”
Following this trend, Lloyds Pharmacy created its own organic skin and body care range, Your Organics. The ten sku range is said to be ecocertified, though it does not specify by who, and products include Anti-ageing Night Cream and Eye and Lip Lift.
Ethical claims have also been a popular choice for many own label brands as retailers respond to the growing consumer demand for sustainability and fair trade. According to Mintel, 16% of own label launches in 2008 claimed to be ethical, compared to just 2% in 2006. Amongst branded ranges the figure was 13% in 2008 and less than 1% in 2006.
Boots recently launched Extracts, a range of body care and bath products containing natural ingredients that are claimed to be community traded and sustainably sourced. Key ingredients include organic cocoa butter, farmed by a cooperative in the Dominican Republic, and shea butter sourced from a women’s cooperative in Ghana.
“It is really important for our customers to know where we source our raw ingredients,” says Stephen Johnson, Boots’ sustainability development manager. “My hope is that we can further develop this concept to provide sustainable trading relationships with disadvantaged communities from around the world.”
SEGMENTATION SUCCEEDS
Skin care has seen one of the most interesting evolutions in the private label sector, with technology and formulas rivalling branded products to such an extent that there really is no difference in product claims nowadays.
Anti-ageing has been an area of particular innovation with retailers launching ever more sophisticated answers to the problems of ageing. Sainsbury’s for instance has added two new anti-ageing ranges to its Skin Therapy range. Age Defence is designed to protect and fight the early signs of ageing and contains hexapeptides to firm and plump the skin. Products include Collagen Boost SPF15 Day Cream, Collagen Boost Rejuvenating Night Cream, Collagen Boost Beauty Serum and Collagen Boost Eye Serum. Age Reverse meanwhile targets mature skin and features a SkinRecovery Complex containing pro-retinol that is said to help improve skin firmness and reduce the appearance of fine lines, wrinkles and uneven pigmentation. Products include Radiance Boost Day Cream SPF15 and Eye & Deep Wrinkle Treatment.
Similarly The Organic Pharmacy introduced Rose Plus Marine Collagen Complex, an anti-ageing treatment said to reduce fine lines and protect and stimulate elastin and collagen production.
And spa own brand Champney’s, sold exclusively through Sainsbury’s, has tapped into the younger consumer’s purchasing power with the launch of the Calming Skincare line. Products are said to soothe troubled skin and clear spots and irritation.
While forward thinking innovation has been the cornerstone for many skin care launches, Boots has looked back into its archives and its heritage for the new Original Beauty Formula range. The range, which coincides with the retailers’ 160th anniversary, features 13 products including Cold Cream, Skin Tonic, Vanishing Day Cream and Bath Oil.
And it’s not just the skin care sector that is benefiting from increased segmentation. Hair care is also seeing increased activity. “In 2008 just 4% of own label launches were focused on hair care and there is scope to innovate,” says Richmond.
Similarly dental care and colour cosmetics have launched more specialist products. Boots’ Expert range now includes a number of products for consumers who are undergoing orthodontic treatment, while Barbara Daly’s make-up range, sold through Tesco, has launched The Perfect Ten Collection to mark its tenth anniversary. The line includes Goodbye Yellow, a brightening nail base, and Easy-on-the-Eye Pen, a sheer eye colour.
While the economic situation may be having a detrimental effect on many manufacturers, private label has the opportunity to buck this trend. As Sharoff says: “Evidence from past recessions makes it clear that consumers were satisfied with private label since branded products taken as a whole did not regain market share when the recession was over. And if retailers invest the same degree of innovation and creativity in non-food as they have in the food sector private label share will grow.”