By Vicky Morgan, account director, Retail
Since the last recession, retailers have invested heavily in their private label brands. Many have developed tiered offerings, focusing on product features and benefits, not just price. Potentially, this makes Private Label a perfect match for the impacts arising from the COVID-19 lockdown, appealing to both the hardest hit and the gainfully employed. So how did the categories perform when we drill down into the numbers?
Private label in NZ pre-packaged grocery
Patterns observed in the Great Recession of 2008 are re-emerging in this one. Categories that already have strong Private Label development continue to gain the most.
How are Kiwi shoppers feeling?
In 2019 (pre COVID-19), private label in NZ grocery experienced value growth of +7.9 per cent and unit growth of +10.4 per cent. The food department dominated, with 83.4 per cent of value sales, and where 13.8 per cent of every dollar spent went to Private Label. During COVID-19 (01.03.20 to 07.06.20), this value growth amplified to +27.2 per cent, with unit growth at +18.6 per cent. We are now seeing 14.2 per cent of every dollar spent on Private Label. Baking and Cooking had the greatest rate of growth (+48.8 per cent) with Dairy the greatest actual value growth (+$50.6m) versus the same period last year. In non-food, Private Label eclipsed almost all brands growth.
COVID-19 might be technically eliminated but deep rooted concerns prevail, particularly about long-term economic ramifications. People are concerned about their personal finances, with 45 per cent of households seeing income compromised and over half experiencing a drop in hours worked.
Many are not maintaining regular spending. Just one in five expect spending habits to resume when the economy improves and only 31 per cent anticipate their finances improving in the next year. With a quarter of households reporting grocery affordability as a challenge, there’s a strong focus on finding the best deal.
Sensitive to perceived price rises and adjusting what they buy (private label/larger packs), 37 per cent of Kiwis say they’ve made cutbacks to save money in the last six months.
Private Label key trends:
Strong tailwind: almost 70 per cent of Kiwi’s often buy Private Label
It’s affordable: 68 per cent of Kiwi’s buy own label to save money
I feel good about buying Private Label products: I can save money, my family likes them, I can serve to guests
It’s why I shop there: Private Label brands influence store choice
It’s about best value: shoppers in 2020 are much more price conscious across categories
It’s about quality: shoppers have very positive perceptions of Private Label brands relative to Manufacturer brands.
Retailers driving shopper loyalty and retention
Retailers continue to promote their own brands, with price perception messaging and reassuring shoppers about value for money across the store. Countdown has created an e-commerce page showcasing its own brands, along with an online community of customers known as ‘Bunch”. Members are given full-sized own brand products to try for free, enabling them to experience them first-hand, and review and chat with other members.
Future of Private Label
National brands could face a tough time, with 51 per cent of Kiwi shoppers anticipating further food price increases, and consumers are always looking for more affordable options in store during times of crisis.
Private Label, meanwhile, is an increasingly competitive threat. It holds potential for retailers who want to reach consumers across the economic spectrum, driving visitation and loyalty. The risk to brands is high when differentiation and loyalty are low, and the financial incentive for shoppers and retailers is strong.
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IRI COVID-19 Shopper Survey NZ April 2020
IRI Market Edge NZ Grocery Data
IRI Market Edge Grocery Data [Since 1st NZ COVID-19 case (Rolling from w/e 01.03.20 to 07.06.20)]