'Housebrands' no longer the poorer cousin of retail attracting R38bn in spend

The days of in-house retail brands being treated with a fair amount of disdain by South African consumers have come to an end with a new Nielsen State of Private Label in South Africa report revealing that they now account for R38.4bn of consumer spend at hypermarket/supermarket tills or R10 out of every R50 spent. In addition, 63% of South Africans now feel that private label* quality is "as good as that of established name brands".
*For the purposes of the study a private label (store) brand, was defined as a brand that is sold exclusively by a specific retailer or chain of stores. The basket coverage comprises 155 categories across eight Super Groups: Grocery, Perishables, Non Alcoholic Beverages, Confectionery, Personal Care, Home Care, Baby Care and Health Care.

In light of this change of heart by local consumers, South Africa’s Private Label (PL) industry is growing faster than competitor name brands, with its annual value share of the South African retail market having increased from 18.8% in 2014, to 19.4% in 2015 and 19.6% in 2016.

Craig Henry, Nielsen MD Retailer Vertical Africa-Middle East
Craig Henry, Nielsen MD Retailer Vertical Africa-Middle East
It’s also not just less affluent households seeking out PL brands with Nielsen MD Retailer Vertical Africa-Middle East Craig Henry reporting that “more than half of all PL spend is from wealthier households, with (LSM) 7-10 consumers accounting for more than half of private label spend. Our research shows that the average consumer spends R1,115 on these types of products per annum, with the LSM 7-10 market spending two thirds more than the average. That said, spend from middle and lower income households is predicted as having the greatest potential for growth.”

A quality alternative

The report also looked at South African consumers’ perception of PL products when it comes to quality: 71% feel they’re a “good alternative” to named brands, 63% believe their quality is as good, but 60% think they have cheap-looking packaging. Henry cautions, however: “This perception should be seen in context, bearing in mind that by volume, most PL business is aimed at creating an entry-level price point and there are in fact many instances of highly innovative and appealing packing in some categories.”

In terms of Price/Value, 83% of consumers feel it is important to get the best price on a PL product, 70% compare PL prices in their primary store to others and 62% believe they are ”good value for money”.

Against this backdrop, it seems private label products in the ‘essential’ Staple categories in particular, are growing faster than named brands as an alternative ‘best product for best price’ consumer choice, as consumers look for greater value for money in tougher times.

As a result, the Nielsen report found that nearly 70% of private label sales stem from grocery (31.2% over 23% of name brand) and perishables (37.9% over 20.5% of name brand). “The composition of consumer’s baskets is changing as cheaper proteins and carbohydrates are sought. However, there has also been a scaling back on luxuries in consumer spend and a subsequent rapid expansion into the Confectionary, Personal and Baby Care categories by no name brands,” explains Henry.

Looking at category specifics, the top five categories account for 30% of private label sales and include IQF chicken, long-life milk, fresh chicken, fresh milk and cooking oil. These account for 34% of the incremental spend on private label, with noticeably more long-life milk at 22.5%, and fresh chicken at 12.4%.

The top 15 categories account for 54% of private label sales, and in addition to the top five include: chilled processed meats, toilet tissue, sugar, eggs, yoghurt, biscuits, carbonated soft drinks, prepack cheese, short life juices and biltong. These products account for 64% of incremental spend.

Henry explains that “price and promotion sensitivity has intensified private label market share, concentrated in the grocery and perishable categories.”

However, he does point out that despite a buoyant 9% annual growth in retail spending, both private label and name brands are set to see further basket dynamics changing as consumers adopt more cautionary tactics to make ends meet.

4 Nov 2016 09:53

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