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Private labels are starting to feel the love

Their popularity is on the rise – and not just because consumers are feeling the pinch.
No name? No problem. South Africans are acquiring a taste for the combination of quality and good value in private label goods. Image: Nadine Hutton, Bloomberg

There was a time when no-name brands were deemed to be cheap and tasteless – but the tables have turned, with many households now embracing them as the product of choice.

According to Nielsen’s State of Private Label Report, private labels were local households’ favourite product of choice during the initial period of the lockdown – with ready-to-eat bread rolls proving most popular.

As a result, private-label products experienced double-digit growth in the initial stages of the lockdown.

Read: Consumers are getting comfortable with ‘no-name brands’

This was particularly evident in March, with a massive 27.2% increase in sales taking place during pre-lockdown stockpiling versus the same month in 2019, according to the report.

Better quality products

Gareth Paterson, director of retail vertical at Nielsen, says this is due to the increased availability of more quality products among no-name brands.

“It is the value for money proposition as well as the availability of quality private label brands that ensured the growth of the sector during the lockdown period,” he says. “This allowed it to build on the momentum and innovation it has displayed in previous years.”

Paterson is confident that this momentum will continue to increase “based on the increased consumer exposure to quality retailer-owned brands”.

“This will drive longer-term adoption of private label products in many instances, as once consumers trial these products, they appreciate the quality and price competitiveness of these goods,” he says.

Private label growth

Source: Nielsen

No longer just a brand without a name

Paterson attributes this primarily to innovation, which has been evident through product development across the board and has led to enhanced consumer perceptions of private label products.

He notes that the positive trajectory is also evident in the sector’s annual share of the country’s fast-moving consumer goods (FMCG) basket, which stood at 20.4% at the end of June, with a particularly strong result for the second quarter at 23.5%.

He says it is important to distinguish between growth in market share and the increase in the rand value of these sales.

Private labels accounted for 20.4% of total FMCG sales to the end of June, up from 19.2% for the same period in 2019. When looking at the second quarter in particular, private labels had a 23.5% share of the market. “That timeframe included pre-emptive stockpiling just prior to lockdown and the subsequent first few months of full lockdown,” says Paterson.

Read: Covid-19 to change how people spend money

Private labels catching up

He says in terms of rand value, the private label sector now commands R63 billion in annual consumer goods sales (up from R55.4 billion in 2019) – but brand names continue to dominate with R245 billion in annual sales.

Though Paterson could not confirm which retailers saw the largest increase in no-name brand sales, he says the quality of private label goods is no longer seen in a negative light.

“South African consumers now consider these products as worthy alternatives,” he says.

“Based on this deepening relationship, we expect a continued upward trend in the purchase of [private label] products and will see these items taking a greater share of consumer baskets.”

Paterson says the perceived line between no-name brands and branded goods is blurring. “The key is to understand shifting consumer behaviour and provide shoppers with quality, value for money offerings that will help offset consumers’ growing financial challenges, no matter which sector you play in.”

Over the past year, ready-to-eat bread rolls showed the largest increase, experiencing 32% year-on-year growth in sales. Desserts, cakes and sweet products, as well as refrigerated dinners, remain among the most popular no-name brand purchases.

Raw and refrigerated meat, milk, and refrigerated dinners were also among the best performers during lockdown.

Listen to Nompu Siziba’s interview with economist Mike Schüssler (or read the transcript here):

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…well when you have two companies that manufacture 90+ % of toothpaste, soap and detergent, Colgate and Unilever; don’t be fooled Pic n Pay is into manufacturing or the “Brand” is cheaper than the generic

Same goes for creams and shampoos, dairy, soda and and and

Unilever will blend a margarine for the hyper-stores less the so called omega addins

I stick to Nivea and real butter thank you 🙂

End of comments.

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