As South African consumers increasingly pursue value for money in these troubled times, demand for private label goods is rising significantly.
Lockdown has accelerated this trend, with private label FMCG items showing a massive 27.2% increase in sales during March, according to the latest State of the Private Label Report released by research company Nielsen.
A private label product is made by a third-party company to a particular retailer’s specification and then sold exclusively under that retailer’s brand name. These are sometimes also referred to as house brands.
Private label products have 20% market share
Private label products command a 20.4% annual share of the overall South African FMCG basket, Nielsen says. Its share for the June quarter was even higher at 23.5%
Private label products now account for consumer spend of R63-billion in 2020, versus R55.4-billion in 2019. Name brands still dominate, though, with R245-billion in annual sales.
“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,” said Nielsen spokesperson Gareth Paterson.
Private label’s popularity will continue to rise
“This allowed [the sector] to build on the momentum and innovation it has displayed in previous years.”
He added: “There’s no doubt that the gains made by private labels during the lockdown will continue, based on the increased consumer exposure to quality retailer-owned brands.
“This will drive longer-term adoption for private labels in many instances, as once consumers trial these products they appreciate the quality and price competitiveness.”
Fewer people buy these items on price alone
Among the interesting trends highlighted by the Nielsen research is that a decreasing number of shoppers say they compare the price of store brands with named brands. Seventy-one percent said they did so in 2019, versus 80% and 77% in the previous years.
This seems to indicate that a perceived lower price is becoming less of a factor when consumers chose a private label brand over a named brand.
Private label products that increased in popularity in the past year include ready-to-eat bread rolls (biggest year-on-year sales growth of 32%), deserts, cakes, sweet products, refrigerated dinners, other frozen foods, shampoo, soap and body cleansers.