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Economic downturn provides opportunities for private label sector
During a time of financial crisis and low disposable income, consumers are less likely to buy expensive, branded food products. According to the Office for National Statistics, disposable income available to households fell 1.7% between the end of 2012 and the first three months of 2013; the biggest decline since early 1987.
As discussed in the MarketLine case study, Supermarket private labels: growth following economic downturn, this has in turn led to consumers seeking out cheaper private label products that they can afford when carrying out their weekly food shopping.
The tough economic situation in the UK has resulted in the migration of customers towards private label offerings on an unprecedented scale. This has become evident in the fast rising sales in discount stores and the growing importance of private label products. Increased numbers of customers have discovered that in their pursuit of value, they do not have to sacrifice quality when shifting to private labels, which tend to be significantly cheaper than their branded counterparts.
Figures from Datamonitor Consumer demonstrate private labels grew faster than all food labels over the period 2002-2013.
The penetration of private label goods is high in the UK. Large retail chains in the UK including Tesco, Asda and Sainsbury and Aldi (a global discount supermarket chain) continue to invest in private labeled products. They are not only targeting customers in a niche market, but also continuing to offer competitive pricing on quality goods. This has negatively impacted the producers of many branded products.
Supermarkets have used their widespread store network to establish their position as leading players and can leverage the advantage presented by this burgeoning new category. These companies understand that consumers are less likely to spend on expensive brands and are rooting for cheaper alternatives.
This particular industry is becoming more and more appealing to manufacturers and distributors due to rising demand and the fact that this is not an oversaturated market means there are opportunities for companies to establish a strong position.
For more, explore our Case Study today.
Alternatively, please check out our range of retail reports.