House brands picked to take bigger slice of pie

Steve Mitchell

The phenomenal growth in sales of private-label goods is expected to continue, a survey of manufacturers has found.

ACNielsen asked senior managers within the fast-moving consumer goods manufacturing industry their views on private-label goods as part of a new "Retail Barometer" survey.

The survey found the threat of private label ("house" brands) was looming large in the mind of supermarket suppliers.

Ninety per cent expected shoppers to buy "premium" private label goods - an emerging class of high-end product that competes directly with manufacturers' own branded labels.

ACNielsen figures show private-label products account for about 11 per cent of all supermarket sales.

Most manufacturers expect that figure to rise to between 12 and 15 per cent and nearly a third forecast it to be between 16 and 20 per cent by 2008.

Private-label goods have traditionally been marketed as a cheap alternative to branded products.

ACNielsen New Zealand managing director Steve Mitchell said the survey findings indicated manufacturers were expecting "premium" private label to become a significant factor in the local market.

"In other markets, particularly in Europe, there are private labels that do command a premium," Mitchell said.

Two factors supporting manufacturers' view that private label sales will grow are:

* Woolworths Australia's acquisition of Progressive Enterprises, which owns the Foodtown, Woolworths NZ and Countdown supermarket chains. Woolworths has aggressively marketed private label goods in its Australian supermarkets.

* The anticipated arrival in New Zealand of cut-price supermarket chain Aldi, which sells predominantly private-label goods in Europe.

In Australia, where it has experienced strong growth since launching in 2001, Aldi stores stock a mix of traditional branded goods and private label. Its branded range is expected to reduce as the chain gains shopper support in Australia.

Seventy-two per cent of supermarket suppliers expect Aldi's entry into New Zealand will make the grocery market more competitive.

The survey found that managers of manufacturers who supplied private-label products to supermarkets were more optimistic about future business than those who did not.

Thirty-two per cent of private label manufacturers expected sales growth above 6 per cent in the coming year. Only 20 per cent of non-private label suppliers were that optimistic.

An ACNielsen study found late last year that private label goods had grown to cover 64 per cent of product categories within supermarkets. Those categories where consumers had a private label option accounted for 88 per cent of sales.

Ninety-five per cent of shoppers said they bought some type of private-label product and 72 per cent considered private label quality to be as good as the big brands.

ACNielsen's Retail Barometer survey of senior managers in the grocery manufacturing sector aims to track business confidence and monitor perceptions on issues.