Nielsen: ‘house brands no longer the poorer cousin’

No-name brand cosmeticsThe days of in-house retail brands being treated with a fair amount of disdain by South African consumers have come to an end. This is according to a new report by Nielsen entitled State of Private Label in South Africa, which reveals that this segment now accounts for R38.4-billion of consumer spend at hypermarket/supermarket tills, or R10 out of every R50 spent. In addition, 63 percent of South Africans now feel that private label (PL) quality is ‘as good as that of established name brands’.

For the purposes of this study a PL (or 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. These are personal care, home care, baby care, health care, grocery, perishables, non-alcoholic beverages, and confectionery. 

A growing market

In light of this change of heart by local consumers, South Africa’s PL segment is growing faster than competitor name brands. Its annual value share of the South African retail market has increased from 18.8 percent in 2014 to 19.4 percent in 2015 and 19.6 percent in 2016.

Less affluent households are not the only ones seeking out PL brands. Nielsen’s MD of retailer vertical for Africa-Middle East, Craig Henry, reports: ‘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 to have the greatest potential for growth.’

A quality alternative

The report also looked at South African consumers’ perception of PL products with regard to quality. A total of 71 percent feel PL products are a ‘good alternative’ to name brands; 63 percent believe their quality is as good though 60 percent think they have cheap-looking packaging.

‘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 packaging in some categories,’ Henry cautions.

In terms of price/value, 83 percent of consumers feel it is important to get the best price on a PL product. Some 70 percent compare PL prices in their primary store to prices in other stores, and 62 percent believe that they are ‘good value for money’.

Against this backdrop, it seems PL products in the ‘essential’ staple categories are growing faster than name brands as an alternative ‘best-product-for-best-price’ consumer choice, particularly as consumers look for greater value for money in tougher times.

As a result, the Nielsen report found that nearly 70 percent of PL sales stem from grocery (31.2 percent over 23 percent of name brands) and perishables (37.9 percent over 20.5 percent 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 personal and baby care, and confectionary categories by no name brands,’ explains Henry.

‘Price and promotion sensitivity has intensified private label market share, concentrated in the grocery and perishable categories. Despite a buoyant nine percent 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,’ he concludes.

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