You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

NEW SENS search and JSE share prices

More about the app

Consumers are getting comfortable with ‘no-name brands’

Private labels are giving regular brand names a run for their money.
Image: Supplied

Consumers are no longer seeing ‘no-name brands’ as the cheaper alternative and the sales numbers prove it.

R53.9 billion: that is how much is being spent on private labels annually, based on the latest findings from the 2019 Nielsen State of Private Label Report, which covers the modern trade sector in South Africa.

This represents 9.6% year on year growth, ahead of the 4.4% growth of branded goods, seen within modern trade.

It says the growing importance of private label is also seen in its 22% overall share of fast-moving consumer goods (FMCG) sales in South Africa, with a steady increase from 21% in 2018 and 20% in 2017.

Nielsen SA retailer vertical lead Gareth Paterson says the private label market has developed because South African consumers have started to trust them and no longer view them as the cheaper version.

“Over the years as people have tried these private labels, they have realised that they are just as good as some of the branded products and because of that trust they have decided to purchase some of the private label brands instead of the branded products,” Paterson says.

According to the report, the private label market has seen double-digit growth in the past three years, while named brands seem to have stagnated, based on the graph below.

Private label shows more than double the growth of named brands within SA’s modern trade

Source: Nielsen State of Private Label Report for South Africa, 2019

Increase in innovation

Paterson says as retailers’ private label products have become more innovative, 70% of the biggest contributors to incremental growth in 2019 came from perishables and dry groceries, with chicken and long-life milk bought the most. They have also seen a recovery in categories like chilled processed meats.

Other products that have seen good growth are confectionary, baby care, and personal care products. 

“As the country matures, private label is finding its space within the basket,” Paterson says.

He adds that retailers have made immense strides in finding the right suppliers and the right people in key positions for product development, who are able to position private-label products significantly in the market.

“We have definitely taken it more seriously, in understanding that if they are going to compete with these serious brands, they have got to make sure that they understand the consumer,” Paterson says.

He says it’s important for retailers to understand consumer preference in packaging and ingredients.

Future trends

Moving forward he sees retailers investing a lot more into private-label products and new product categories that don’t currently have a share in private labels.

As this happens he believes it will escalate the competition between private labels and brand labels.

“We also have to be very cautious of the fact that the brand labels have more expertise and people in place that will make sure that they compete in this space, by making sure that they are innovative and they understand the consumer as well.

“This is going to be a good competitive situation in the next couple of years,” Paterson says.

Omri Thomas, portfolio manager at Abax investments, says that the increase in private labels is a global phenomenon. This he says is because consumers are no longer as brand conscious as they used to be.

Thomas explains that retail stores have managed to diminish the ‘power’ named brands enjoyed over the years, by providing consumers with cheaper, good-quality products.

He too foresees significant growth in private labels. This he puts down to consumer demand for private labels as well as from retailers who receive higher profit margins from the products.

“There is a definite push by them to increase their own products.”

The retailers’ performance

Thomas refers to how retailer Pick n Pay intends to accelerate its own brands in the 2020 financial year, according to its 2019 investor presentation.

Pick n Pay’s current brand participation is at 21%. It launched 500 products in the 2019 financial year, including meal solutions, healthy snacks, pet food, and nappies. It also re-designed 700 products.

In the presentation, it says customers are responding well, with the strongest sales in baking, convenience and health products.

Spar says it’s focusing on environmentally-friendly packaging. Sales were up 9.1% year-on-year to R9.2 billion in 2019.

In its 2019 investor relations presentation, Shoprite reports a private label participation of 16.5% in South Africa (up 30 basis points). With the 21 private labels it has, it makes R100 million each in annual sales.

It adds, “Four out of ten baskets purchased contain private labels.”

COMMENTS   22

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

be careful! — this could be another ripp-off

i wanted to buy an 18-pack-toilet-rolls a week ago.

the no-name-brand was slightly cheaper.

but just for the hell of it, i took it and the more expensive pack
to the veggie section and weighed both

the no-name-brand was weighing less — i calculated the more expensive pack is about R5 cheaper than the no-name-brand!

I didn’t know that toilet paper got sold by weight.

I suppose g/sq.m matters when wiping?

you know, bright spark,
.
.
.
.
don’t bother
.
.
.

Boy MJ – you sure have got lots of time on your hands. Did you weigh your toothpaste too?

second try to post without moderation

be careful! — this could be another ripp-off

i wanted to buy an 18-pack-toilet-rolls a week ago.

the no-name-brand was slightly cheaper.

but just for the xxxx of it, i took it and the more expensive pack
to the veggie section and weighed both

the no-name-brand was weighing less — i calculated the more expensive pack is about R5 cheaper than the no-name-brand!

When it comes to toilet paper I always by the no-name brand. Considering the application of the product, it just makes sense and the same goes for so many other products.

they GOT you!

(see my comment once it is moderated)

here is my third try:

be careful! — this could be another — word erased —

i wanted to buy an 18-pack-toilet-rolls a week ago.

the no-name-brand was slightly cheaper.

but just for the ???? of it, i took it and the more expensive pack
to the veggie section and weighed both

the no-name-brand was weighing less — i calculated the more expensive pack is about R5 cheaper than the no-name-brand!

MJ – I must give you an A++ for persistence !!!

for commenting or weighing toilet rolls in the veggie section?

@mj stellenbosch

I have sympathies for re-posting.

On numerous occasions my own past comment (in our “Tools / My Comment” link) when it initially appeared within a red-lined zone (i.e. still be be moderated)…and thereafter been deleted/gone.

i think longer comments are moderated?

yeah, disappearing comments are even a bigger worry,

i mean, they could be waiting on us somewhere until judgement day … … …

2ply toilet paper are now available in a 200 sheet roll as well as the standard 350 sheet rolls. Be careful what you compare. Typically No Name brands are manufactured by the same National Brand suppliers, and as they run the risk of losing the No Name contract (and marketshare), it makes little sense to try and take shortcuts.

I find that the toilet paper lasts twice as long if you use both sides.

It’s like ”generic medication”!

What is wrong with no name brands? Only the price, I bet my bottom dollar it is the same stuff in that can/packet.

My tongue cannot tell the difference and I am sure the nutritional content is within limits.

The next rip off after no name brands is the WW brand………just another way of saying “more expensive”.

100%. In most cases, the national brand suppliers pack the private label too. Same production line, same product just, another label.

Woolworth’s is definitely the biggest rip off.
Free range, organic, preservative free, sugar free, fat free, cholesterol free, low GI, sodium reduced, sustainable …. all reasons to put up the price.

No name brands used to be the cheap alternative. Now they are just a ploy since few are any less expensive than name brands. Rather look for the imported, unknown name brands. You’re more likely to save money there.

Cheap and nasty are no longer what private labels stand for. The aim is though to be slightly cheaper than national brands, but if you do find that national brands are cheaper than private label, you are getting a good deal.

I am willing to buy brandless clothing (and have for years) since I buy by quality and fit. Regardless of brand, I never buy clothes made of synthetic material like nylon or polyester since I am allergic to polyester. Interestingly there are many brands you mislabel their clothing as 100% cotton but you can feel that it isn’t and when I put it on I know it (because I am allergic)

That said, the only house brand food items I buy are Woolworths.

Pick ‘n Pay has that they NoName brand going for decades and I never touch it. Checkers has done a more stealthy move and brought in a number of brands that are actually just Shoprite brands. If you look at the back of the item and it says “Packed for Shoprite, Brackfell” then you know.

I don’t trust these two retailers when it comes to food quality – particularly the Shoprite group who persue profit above all else.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us: