Private labels are a growing threat to big name brands

The big brands on supermarket shelves are under increasing pressure as Asia-Pacific consumers have indicated they will continue to choose own-brand consumer packaged goods, even when finances are not so tight.


Spending on private label across Asia-Pacific countries (Australia, China, Japan, Singapore and South-Korea) will increase to reach $24.65 billion for food, $11.17 billion for non-alcoholic drinks, $0.58 billion for alcoholic beverages and $0.37 billion for household care products by 2014, according to research firm Datamonitor.


Research by the independent market analyst has revealed that customers are so impressed with the store brands (also known as private labels) offered by supermarkets that half are choosing where to shop based on where they can buy their favourite own-brand products.


In fact, more than two thirds of Asia-Pacific consumers believe own-brand foods are as good as, if not better than, leading famous brands – 50% think they are identical in quality and 27% go so far as to say that they are superior.


Sales of private labels notably increased as a result of the recession, when consumers were looking for ways to reduce their spending on groceries. However, many have since found the products to represent very credible alternatives, and as a result have continued this buying behaviour despite the ongoing economic recovery.


Buying private label is set to increase across all consumer packaged goods, but particularly for food and alcoholic drinks. Between 2009 and 2014 sales will rise from $0.42bn to $0.58bn for alcoholic drinks and from $18.04bn to $24.65bn for food. There will also be a significant increase in the amount spent on household care products – from $0.31bn to $0.37bn.


“One example of the growing success of private label has been Aldi in Australia, which achieved an increase in profits of 30% in 2010. The company’s product range is largely private label, locally sourced and cheaper than its main rivals’ Coles and Woolworths. The company has been recognised throughout the industry – in August 2009 it was awarded the title of 2009 Australian Retail Innovation of the Year by Australian Retailers Association, as well as the category as retailer of the year for its food, drink and grocery range,” commented Matthew Jones, consumer market analyst, based in Sydney.


Datamonitor believes that with high levels of satisfaction regarding private labels, national brands face a significant challenge to try to win customers back, even when the economy improves over the next five years.


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