High inflation is making consumers across Europe buy significantly more private brands, new figures show. This has everything to do with the widening price gap between A-brands and private brands.
In full corona crisis, national brands still managed to strengthen their market position: consumers needed confidence in uncertain times. But influenced by high inflation last year, supermarket customers’ buying behaviour has changed sharply: shoppers are putting more lower-priced private brands in their shopping trolleys as family budgets are under pressure.
This trend is continuing across Europe, according to the latest edition of the International Private Label Yearbook, a publication by PLMA (the association of private label manufacturers) and research firm NielsenIQ. Total private label sales grew by as much as 25 billion euros to 302 billion last year.
There is only one exception: in Switzerland, the share of private labels fell slightly. But in that country, private labels now have a 51.6% share of sales, the highest share in the European region. And the entire food market there declined in 2022. In the other 16 countries surveyed, there was an increase in sales share. The strong increases noted by the study were in the Czech Republic (+3.5%), Portugal (+2.9%), Spain (+2.2%) and Hungary (+2.2%).
In the Netherlands, private brands already account for 44% of supermarket sales. In Spain it is 43.3%, in the UK 42.7%. In Belgium, where the volume share for private label is as high as 55.2%, private brands account for 37.8% of sales, indicating that retail brands there are considerably cheaper than the big brands.
Price gap widens
The figures do not come as a big surprise: for more than a year, brand manufacturers have been implementing hefty price increases to cope with sharply rising costs. In doing so, they clash with supermarket chains, which want to keep prices low. Although private labels also pass on the rising costs – often even more in percentage terms than brands – the price gap continues to widen. These differences are very visible to consumers on the supermarket shelf.
More and more FMCG multinationals are now reporting that they are seeing a decline in volumes sold as a result of those price increases: more consumers are looking for cheaper alternatives in times of high inflation, and supermarkets are cleverly capitalising on this by highlighting their cheaper private brands: think of Albert Heijn‘s Price Favourites, Delhaize‘s Little Lions or Carrefour‘s buying power promotions. But brands have no choice but to raise prices to avoid jeopardising their profitability. Also in 2023, most food brands will implement further price increases.