The recession heralded a boom in private label C&T in western markets but growth has plateaued. In response, retailers are improving their top tier own brand options to maintain consumer interest, as Julia Wray reports
The last 12 months has been a dynamic period for the private label cosmetics and toiletries (C&T) market; several major retail names entered the fray while established players sought to offer consumers a wider range of options, most notably higher tier lines.
Looking at the most recent data from Euromonitor International, it’s clear why retailers have upped their game. In 2006, prior to the recession, private label brands (including those of Alliance Boots) accounted for 2.6% of the global C&T market, a percentage that increased to 2.9% in 2009 and 2010 but which dropped to 2.8% in 2011. Even in western Europe, private label’s strongest region, there are signs that the own brand recessionary boom has plateaued. Percentage share jumped from 6.1% in 2006 to 7.3% in 2010 but between 2010 and 2011 there was only a 0.1% rise.
“There was a definite boost for private label linked to recent economic pressures as private label is most linked to developed markets, which were worst hit by the recession,” says Antonia Branston, a senior retail analyst at Euromonitor International. “Private label is still making gains in some regions… [but] there is a definite slowdown. Although there are still economic pressures there is less fear and less economising.”
Moreover, brands are working hard to regain that small but financially significant chunk of the market gained by private label in the early years of the downturn. “Branded companies normally increase promotion and advertising as a way to build consumer awareness or to regain market share that they have lost either to branded competitors or to retailer’s own label,” Brian Sharoff, President of the Private Label Manufacturers Association (PLMA), tells SPC.
“Retailers who are committed to their private label programmes traditionally counter by strengthening shelf position for their own brands or by adding their own brands to promotion and advertising that they are doing. Generally, retailers do not lower own brand prices to compete with manufacturers’ brands since the retailer’s own brand price is lower to start,” he adds.
Miles Dunkley, Managing Director of SLG Beauty, also notes that the ongoing economic slump has had some interesting repercussions when it comes to the fashion beauty sub-sector of private label.
“We have found that the recession has polarised the approach retailers have had towards private label with the key being the size of retail group,” he says. “Those groups that have a greater numbers of stores are intensifying their focus on private label range creation as they look to maximise margin and arrest control away from well known brands. Conversely, those retail groups with fewer stores are being forced towards off the shelf collections as they look to reduce stock exposure and in doing so avoid the higher level of stock commitments private label will inevitably trigger.”
Crucially, however, he adds: “The recessionary climate and the need to ensure a return on investment has meant that retailers have a greater expectation of the quality of their private label commissions… this has had the effect of raising the bar on product quality and, especially in our case, that of creative execution.”