Private Label: A ‘Good Alternative’

12 August 2005

Private Label: A ‘Good Alternative’ to Other Brands,

Offering the Same Quality & Value Majority of Kiwi shoppers agree that private label is good value for money Nearly half disagree that private label has cheap-looking packaging

Auckland, August 12, 2005 --- Majority of New Zealanders consider Supermarket Own, or ‘Private Label’, Brands to be a good alternative to other brands and offer the same quality and value, according to a Global Private Label Consumer Study released today by ACNielsen, the world’s leading marketing research and information company.

The twice-yearly global ACNielsen Online Consumer Opinion Survey, the largest of its kind, polled over 21,100 respondents in 38 markets from Europe, Asia Pacific, North America, Latin America and South Africa (See Table 1 for country breakdown). The study asked consumers around the world what they thought about Supermarket Own Brands as an alternative to other brands in terms of their quality, value for money, packaging and positioning.

Against a global average of 68 percent who said that Supermarket Own Brands were a good alternative to other brands, consumers’ agreement was skewed heavily in their favour in the highly developed ‘Private Label’ markets of Australia (79%), Europe (78%), New Zealand (77%), North America (77%) and South Africa (72%). This compared to 64% of Latin Americans and 51% of consumers in Asia. (see Chart 1 for regional comparison)

"In a highly developed retail market like New Zealand, private label is seen as a viable alternative to branded products with a current 11 percent share of supermarket sales in New Zealand. Private labels are present in 64 percent of grocery categories and their annual growth of 4.7 percent is on track with other big brands”, commented Alistair Watts, Managing Director, ACNielsen Pacific & Japan.

Good Value for Money, and Quality on Par with the Big Brands Kiwis are in similar agreement when it comes to Private Label Quality and Value for Money, with 80 percent agreeing they were extremely good value for money compared to a global average of 69 percent, and 72 percent considering their quality to be at least as good as the big brands compared to 62 percent globally.

“From their origins in the ‘60s and ‘70s offering cheaper, generic products, Private Label brands have evolved along with the Retailers’ brands themselves. From a generic offering with an aggressive price / lower quality positioning, Own Label brands have evolved to become almost equivalent in quality and closer on pricing in the minds of consumers, particularly in the highly developed markets in Europe, the Pacific (Aust/NZ) and North America,” said Mr Watts.

Some Categories More Suitable for PL than Others When asked if they thought there were some products where quality really mattered, not suitable as Private Label, two in five Kiwi consumers (40%) agreed that there were certain products not suitable for Private Label. This was the same as the global average, but lower than Latin Americans (51%) and Asians (48%). This was also agreed with by one third of consumers in Europe (35%). Only in North America (US/Canada) did nearly one half of consumers (48%) disagree.

“Consumers may be happy with the quality of Private Label when it comes to dog food, kitchen towels, sugar and flour, but are less convinced if they’re considering, say shampoo, baby food or their favourite pasta sauce, particularly in the less developed markets,” said Mr Geoff Smith, Associate Director, Retailer Services, ACNielsen New Zealand.

"But as Private Label continues to grow steadily in New Zealand, the question now is, are we training the Kiwi consumer to commoditise their shopping habits through lower price alternatives, such as Private Label, to the big brand leaders? Commodity categories favour this behaviour, perhaps aiding Aldi's entry into markets such as Australia and when the time is right, New Zealand”, he continued.

More Sophisticated Private Label Packaging Winning Consumers Over As competition intensifies in-store, and the perceived quality gap narrows between Private and Supplier brands, retailers appear to have ratcheted up the quality of their packaging. When asked, just under half of Kiwis (49%) disagreed that Private Label products had cheap, off-putting packaging compared to a global average of 42 percent of consumers, 50 percent of Europeans, 46 percent of North Americans, and 42 percent of consumers in Australia.

Image and Education the Biggest Challenges for Retailers in Developing Markets And just because they’re cheaper, it doesn’t mean they’re only meant for people on tight budgets who can’t afford the best brands! When asked if they thought Private Label products were meant for people on tight budgets who can’t afford the best brands, 58 percent of Kiwis disagreed, compared to a global average of 42 percent and more than half of consumers in North America (56%), Europe (50%) and Australia (51%).

“Our survey clearly showed that the longer consumers have been exposed to Private Label – in terms of years’ in the market and how highly penetrated it is as a percentage of in store total category volume sales - the better they think about them”, commented Mr Smith. "The challenge for product marketers in New Zealand is to strengthen loyalty through increased brand equity, protecting their brand and the category against Private Label."

ENDS

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