Private label – coming into its own


Private label manufacturers are looking to capitalise on a shift in consumer purchasing habits as the recession and an increasingly sophisticated product offer is making the own label sector a force to be reckoned with. Emma Reinhold reports

Private label manufacturers are looking to capitalise on a shift in consumer purchasing habits as the recession and an increasingly sophisticated product offer is making the own label sector a force to be reckoned with. Emma Reinhold reports

The full force of the worst economic downturn in living memory has done little to halt the progress of private label; in fact it’s enjoying an enviable position in the C&T sector as retailers seek new ways to capitalise on the changing retail environment brought about by the recession and consumers’ reaction to this.

One important outcome of the financial crisis has been a greater focus on mass market C&T products, an area where private label has a natural affinity. According to Euromonitor International there has been an overall channel shift from high end to mass market, creating ideal opportunities for private label. In department stores for instance, footfall has fallen 2.8%, while in drugstores sales have increased 2.8%. As a result these mass market retailers are expanding their beauty portfolios, which often includes an own label offering.

“Retailers have been destocking but stepping up own brand development, launching more mass and masstige products with a focus on the basic and niche segments,” explains Irina Barbalova, industry manager, C&T, Euromonitor. “They are focusing more on mass market products, with less R&D behind them and which can be brought to market faster.”

And consumers appear to be following the trend too. “People are trading down to cheaper products, particularly in developed markets such as western Europe and North America,” adds Carrie Lennard, industry analyst, C&T, Euromonitor.

However this phenomenon does seem to be limited to mostly developed markets, notes Lennard, where an established retail landscape is already in place. “Emerging markets such as Africa, the Middle East and the BRIC countries still have a minimal private label presence,” she explains. “The problem is these countries do not have well trusted retailers like Boots or Walgreens. These kinds of stores do not exist in emerging regions and local brands are not that well trusted. The emphasis there is still much more on well known western brands.”

Table 1: Private label market value for C&T, 2009 ($m)
Source: Euromonitor International

According to the Private Label Manufacturers Association (PLMA), private label now holds its strongest competitive position ever. It now accounts for one of every two products sold in the UK and Switzerland. And younger shoppers are showing particularly strong support for the sector. An Ipsos MORI poll found shoppers aged 16-34 are more frequent shoppers of retailer brand products and have a greater awareness of private label than middle-aged and older shoppers. A further Ipsos MORI poll in the US found that seven out of ten shoppers believe that the private label products they buy are as good if not better than their branded counterparts. Yet Brian Sharoff argues that this surge in interest has been building for many years and cannot all be attributed to the current economic difficulties.

“There is no question that the recession has accelerated the growth of private label as a significant number of consumers seek less expensive products and retailers are turning to their private label programmes to meet the extraordinary competitive challenges in today’s marketplace,” he explains. “But the underlying strength of private label has been building for more than two decades and that is not recession related.”

Table 2: Leading private label markets in western Europe by volume
Country% market share
Source: Neilsen for PLMA's 2009 International Private Label Yearbook

Budget is best

The last 12 months have been seen a flurry of private label launches from retailers all eager to capitalise on changing consumer attitudes to C&T products. One common theme with these launches has been their focus on price.

In the US, Target redesigned and relaunched its up & up own label range, while Walgreens has stated its commitment to private label. And in Italy, perfumery chain Limoni is to launch a new concept store, B Basic Beauty, targeting budget conscious consumers and which will principally sell a new private label brand.

<i>Boots Extracts now has Fairtrade accreditation</i>

Boots Extracts now has Fairtrade accreditation

In the UK Tesco has taken ultra budget to a new level with the relaunch of its vitamin E skin care range, which features products with a starting price of 27p for 25 cleansing wipes. The entire nine sku range, which includes a facial wash, face scrub and night cream can be purchased for £6.12, according to the retailer. And Aldi has extended its budget Locura range into colour cosmetics as well as launching the brand in the US.

“Budget beauty is no longer a taboo – we’ve seen a similar effect in the fashion world,” explains Barbalova.

The so-called ‘lipstick effect’ has also filtered down to private label and there have been a particularly high number of colour launches in this sector.

Last month Superdrug launched Makeup Academy, a cosmetics range including lipsticks, glosses, eyeshadows, mascara, powder and nail polish in a kaleidoscope of classic and fashion inspired colours. Each item in the range retails at £1.

And spa brand Champneys, sold exclusively through Sainsburys, has extended its skin and body care ranges with a new nail care collection.

A number of non-beauty retailers have also used colour as a launch pad into the C&T sector. “There has been a big trend in private label colour cosmetic launches with major retailers entering the market,” says Lennard.

Budget fashion retailer Primark launched the Beautiful Colour Cosmetics range last year. The products, which include mascaras, concealers and lipglosses are said to be aimed at budget conscious shoppers who are cutting back but still looking for an affordable treat. Products are packaged in kitsch packaging with witty names including Flirty Winks and Ta Ta for Now.

Elsewhere Topshop has unveiled its long awaited colour line, Topshop Make Up. The collection features a core range of 97 skus, with a further 18 forming part of a limited edition seasonal line, which will focus more on up to the minute trends.

<i>Topshop is hoping to replicate its success in fashion with its new colour cosmetics range</i>

Topshop is hoping to replicate its success in fashion with its new colour cosmetics range

Within companies that already have private label offerings there has also been a shift in retailer strategies and a focus on sku rationalisation and consumer needs. Tiered pricing, although not new has become a more important marketing tool, with retailers such as Tesco following the lead of brands like P&G’s Olay, which has also adopted this pricing strategy.

Green still keen

The natural and organic trend has been an area where private label has had a considerable influence, with many retailers launching certified organic ranges in recent years. The trend, which has gone from niche to mainstream in a relatively short space of time, continues to be popular in the private label sector, although other green claims such as sustainability and fairtrade are also creeping onto packaging.

H&M’s new everyday body care collection contains natural and organic ingredients and has been certified by Ecocert. Products include a shower gel, body scrub, body lotion and lip balm and are packaged in recyclable packaging.

Boots meanwhile has been awarded Fairtrade status for its Extracts range, which now includes a new honey body butter. The honey in the product has been sourced form the APICOOP community in Chile and ensures producers are given a fair wage for their produce.

The use of natural ingredients has also spread to other areas of private label. Champneys has used Monoi de Tahiti in its latest bath and body collection, Thai Royale, while Boots’ new No7 Lift & Luminate range, more associated with high tech skin care ingredients contains white lupin and Hawaiian algae, which the retailer says was also used in its iconic Protect & Perfect skin care line.

<i>The No7 Lift & Luminate skin care line contains some of the same ingredients used in Protect & Perfect</i>

The No7 Lift & Luminate skin care line contains some of the same ingredients used in Protect & Perfect

Supplier onus

A key characteristic of the latest batch of private label launches is the role of the supplier and in particular their increasing involvement in all aspects of private label manufacture.

“One picture that is clear is the increasing trend for suppliers to provide full service,” explains Ian Mackinnon, ceo, Swallowfied. “We are doing a lot more development work in terms of formulation, market analysis and creative design. The design element has become much more important in recent years.”

Swallowfield worked with Primark on its colour range, which has a heavy focus on packaging and design.

“There has also been a move to manufacture more in the UK and we are seeing a lot of people looking to the UK for manufacturing and design capabilities,” he continues. “Now that the pound has weakened to a fair value, it has enabled us to compete again.”

With these skills Mackinnon believes private label will continue to create a very credible alternative to branded C&T products. Sharoff believes good partnerships will be key to further increases in private label penetration.

“The issue for private label is how well suppliers can meet the ongoing need for innovation as retailers seek to keep their offering cutting edge,” he tells SPC. “Future success depends on retailers and manufacturers working together even more effectively than in the past.”

Barbalova concludes: “With the new trend of thrift as a habit, many consumers may never change back to more premium or branded products. Consumers have seen the quality of private label and brands need to be thrift savvy about this as in the consumer’s mind it’s not just about price any more.”