Navigating Inflation: How to Win in Private Label – Lessons from France, Germany and the UK

September 2023

Private label – retailers’ alternatives to brands – tend to benefit from inflation. However, despite record inflation in France, Germany and the UK, the market share of private label in the three countries remained broadly stable across FMCGs in 2022. This is changing in 2023. This briefing analyses the reasons for the lukewarm performance of private label in 2022, how 2023 is different, and outlines key steps to capitalise on the positive tailwinds to win in private label going forward.

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Key findings

Remain price competitive

High and sustained inflation spilling into 2023 has shifted habits, and private label is expected to perform better than it has previously. To benefit fully, private label needs to harness its price advantage in economy and basic ranges. Retailers can introduce, or reorganise their lowest tier ranges under one umbrella label, with a simple but unified logo, easily identifiable in stores and online, clearly highlighting the price reductions to attract consumers seeking to limit spending.

Change perception of private label quality

At the premium end, private label can compete with brands on quality, with dedicated ranges. Organic, all-natural and sustainable products are still in demand, but willingness to pay more for such products is in decline – this is an opportunity for private label to offer high-quality products with in-demand attributes at lower prices than brands. Discounters stand to benefit the most from consumers viewing private label as good quality. This can be achieved through advertising, targeting Gen Z to renew the customer base, design-led store refurbishments and expansion of bricks-and-mortar stores into affluent areas.

Expand e-commerce

E-commerce needs to be a focus if private label is to gain share. Discounters are far behind established supermarkets/hypermarkets and face an uphill struggle in France and the UK, where the e-commerce landscape and online shopping habits are well developed. They should offer click-and-collect in France, and partner with delivery apps such as Deliveroo or Uber Eats in the UK to reach urban populations who favour home delivery. In comparison, the German online eco-system is smaller and is still led by Amazon. Grocery retailers can do more to lead the way there, expanding both click-and-collect and direct delivery.

Scope
Key findings
High inflation expected to stabilise but cost of living pressures will remain
Price rises and a high penetration rate kept private label from gaining share in 2022
Two years of inflation is finally moving the dial in favour of discounters and private label
Lesson from the “Anti-Inflation Trimester”: Standardised logo, reduce price of “basic” ranges
France: The Anti-Inflation Trimester has kept private label prices stable since March 2023
Germany: Private label’s historical advantage on price eroded in 2022, but stable in 2023
Germany: Discounters launch “essential” private label ranges; highlight price cuts on-pack
UK: Private label saw higher price rises than brands in 2022, but stable in 2023
UK: Examples of single and unified umbrella brand for “economy” private label
The upcoming price stabilisation is closing the window of opportunity for private label
A strategy to reframe perception of private label as affordable quality in the long term
Demand for cheaper 100% organic and all-natural products is an opportunity for private label
A growing organic staple foods market, despite inflation, shows promise for private label
Discounters: best performers in 2022 and best placed to benefit from a shift towards quality
France: Aldi shifts towards affordable quality, invests in advertising and store modernisation
Germany: Kaufland bolsters organic credentials and turns to K-pop band to appeal to Gen Z
UK: Discounters unapologetic about copycat brands
France: Expand click-and-collect to win in e-commerce in France
France: Lidl enters the e-commerce fray with the launch of Lidl.fr for non-food products
UK: Developed e-commerce market – boost visibility of private label on websites
UK: Supermarkets and hypermarkets well ahead of discounters in e-commerce
Germany: A fragmented and burgeoning grocery e-commerce landscape, led by Amazon
Germany: Discounters take cautious steps in testing grocery e-commerce schemes
Key summary
Government responses to inflation
Appendix: Private label percentage share of selected industries in France
Appendix: Private label percentage share of selected industries in Germany
Appendix: Private label percentage share of selected industries in the UK
Definitions of Indexes
About Via from Euromonitor International
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