The major UK grocery multiples have successfully employed the Own Label strategy for years, cultivating it into a genuine category. But now, the convenience and independent market – supported by symbol chains, wholesalers and bespoke ranges from manufacturers – can also compete in this thriving sector.
Over the last decade there has been an increase, and evolution, in the development of products sold as own label brands.
It started in the major UK grocery supermarkets, who between them, successfully employed the own label strategy for years, gaining more than half the grocery market with their own branded products.
Supermarkets then strengthened their own-brands by changing their no-frills, low-cost strategy to one of quality at a competitive price, think Tesco Finest. This trend has made a major impact not merely on the FMCG sector, but also in everything from the alcoholic market to homeware.
There was a time when independents struggled to compete with their bigger rivals in this specific area, but not any more.
With continued support from symbol groups and wholesalers over the past few years, added to a more recent change of strategy from manufacturers, independent and convenience store retailers have never been in a stronger position to compete in the own label field.
It is hard to pinpoint exact figures for a market like own label, for it penetrates nearly every category in a convenience store, but to wildly varying degrees.
For example, in some markets such as ready meals, household and fresh products, it performs very well and can represent anything from 18-25% of the market. Whereas in other sectors, such as alcohol, it performs poorly.
However, despite some ups and downs, in absolute terms the own label market experienced growth over the 2010-2016 period, with value sales in selected fmcg markets growing robustly (Mintel).
Following a recovery in the world economy in 2010, when GDP was boosted by 5%, growth slowed to a rate of 4% in 2011. This led to a renewed increase in demand for own label fmcgs, with global sales jumping by 9% in current value.
This was also partly attributable to an increase in own label prices in developed markets as a result of quality improvements, as several retailers developed premium ranges that competed directly with branded products.
In 2012, own label sales fell 1% by current value, as real economic growth slowed to around 3%. This was partly due to the response by the major brands, which sought to compete with premium private labels by running numerous price promotions and stepping up advertising (Euromonitor).
Furthermore, with consumers no longer under as much financial pressure as they were during the recession, many of those who traded down when money was tight were able to switch back to their favourite brands. Also, with food companies in better financial positions, many invested in new products and innovative new concepts.
But in more recent years, the own label category has fought back and is growing again. This growth has been driven both by the expansion of large grocery wholesalers, their ranges and their focus on heritage and provenance, plus the trend towards more sophisticated lines that command higher prices and margins.
Indeed, the emphasis has shifted from aggressive promotion and discounting of own labels to providing better quality and a unique offer.
That is not to say that value still doesn’t remain a huge selling point for own label, for the big pull of own label products will always be their inherent value factor. That the consumers know they should be paying less for a product which aspires to be a like-for-like of a similar, more expensive branded product is imbedded in the shopper psyche.
Today’s own labels though – unlike the generic offerings of the past – are carefully managed and marketed in order to improve the independent retailer’s competitive edge. Indeed, many are now seen as brands in their own right.
With the economic outlook of the UK uncertain following Brexit, added to an already frugal mindset of consumers, it seems the own label category will continue to attract more shoppers, especially if they can still carry their value proposition whilst improving quality.
Wholesale and brands
Landmark Wholesale offers a wide array of own label choices to its symbol members and customers.
An area of particular focus for Landmark Wholesale is around its successful own brand soft drinks. In addition to LSV, its bestselling energy and sports drinks range, it has added Fruqua, three flavoured waters, offering customers a healthy, refreshing alternative to traditional fizzy soft drinks.
Spectra launched in December offering customers an own brand alternative to some of the leading names in the energy market and thanks to its eye-catching design, 500ml can and attractive price point, it is reported to be doing well for retailers.
And now, to ensure it captures the growing customer demand for waters, Landmark Wholesale is launching vitamin-enriched flavoured waters to its LSV energy and sports drinks range.
The brand new 500ml bottles of LSV Waters have an eye-catching design and come in two flavours: Mixed Berry and Lemon and Lime. Enriched with vitamin B to reduce tiredness and fatigue and boost energy levels throughout the day, LSV Waters are designed to meet increasing demand for refreshing and healthier options.
Pricemarked at 40p, LSV Waters offers a minimum 30% POR for retailers.
“We know that shoppers are looking for healthier options to quench their thirst while they’re on the go,” said Jon Burton, Landmark Wholesale Senior Trading Controller.
“With sales of waters currently growing ahead of the soft drinks market, we wanted to offer healthy options that are affordable but without compromising on quality. With one in three UK households drinking flavoured water, LSV Waters meet this need perfectly.”
Many manufacturers are cottoning onto the need for independents to be able to compete against deep discounts offered by multiples, and thus are bringing through their own label formats aligned with their own brands.
Cereal Partners UK’s (CPUK) Harvest Home brand is a perfect example. At total market level, 27% of Cereal sales came from own label in the past year and sales grew 1.2% last year (Kantar), this growth is expected to continue with the forecasted changes to the economy.
Therefore, Harvest Home was launched, and was worth £400,000 in its first year of trading. It is a tertiary brand to give retailers without own label cereal an opportunity to trade in this market.
The brand also sees own label products as an entry point to the cereal category for many shoppers, as the lower price point means there is less purchase risk.
CPUK says it has ambitious growth plans for Harvest Home in 2017 and are hoping to trial POS in some stores to drive trial and awareness later in the year.
2017 will see SPAR continue with development and innovation in its own label range. The SPAR Brand range is going from strength to strength with a turnover of £300m in retail sales. 2016 has seen significant new product development in fresh food as the range aims to enhance customer perceptions of SPAR brand.
There are now over 1,000 carefully selected SPAR brand products in the range, all benchmarked against competitors.
“SPAR has been celebrating it own label success over the past year with 151 award wins for SPAR Brand products,” says Cath McIlwham, Head of Brand at SPAR UK.
The SPAR range complies with the 2017 salt reduction government guidelines and has made up to a 10% reduction in sugar on SPAR brand soft drinks.
“Development and innovation in own brand allows SPAR to continue to compete for customers’ top up shopping needs. The award winning range continues to offer a delicious, excellent value, and ultimately convenient own brand range,” said Mcllwham.
These developments cover many sectors. For example, the next phase of the evening meal strategy looks beyond prepared meals to cover a more comprehensive “meal for tonight” offering for customers. SPAR Brand now caters for the popularity of component cooking as well as offering new prepared meals and the essentials to cook from scratch.
In desserts, the SPAR own label range aspires to meet the needs of all eating occasions, such as Cheesecake pots designed as an individual treat, while cheesecake slices and tiramisu are ideal “treats for two”. Finally the new sticky toffee pudding is one the whole family can share.
In confectionery, SPAR own label impulse bags have moved to a single 3 for £1 price point to ensure SPAR remains competitive. The range has been updated with modern flavours such as watermelon sours and bubblegum mushrooms. The new design appeals to both adults and children and all lines are free from artificial flavours and colours.
Some of SPAR’s most recent innovation comes in the frozen category. The symbol group has identified an opportunity to capitalise on the shift in the frozen ready meals market towards ‘quick cook bag meals’. New lines include Chicken & Bacon Pasta, Chicken & Prawn Paella and Chicken Tikka Biryani.
Another symbol group with a strong own label offering is Costcutter.
Costcutter Supermarkets Group’s own brand is called Independent. There are 600 products in the range covering the everyday essentials such as butter, bacon and orange juice to more indulgent treats such as their award winning Specialist Buttery Shortbread Fingers.
Food-to-go continues to grow, particularly around sandwich solutions and the Independent sandwich range is a key range for the group, offering retailers a fully tailored offer, both in size and product mix, to meet the needs of their local shoppers.
Last year saw Costcutter create the Shopper First programme, the group’s most in-depth study in their 30-year history, drilling down to an individual store level. This gives their retailers detailed shopper profile information so they can develop their range to best meet the needs of their shoppers, including a strong own label offering.
The focus over the next year, says the group, will remain on quality, benchmarked against branded and non-branded products, and creating compelling everyday prices for shoppers.
A new offering will have Nisa members interested, after the symbol group announced the launch of its very own wines range to add to the ever-increasing number of products now available under its Heritage own label brand.
Unveiled at Nisa’s Annual Retail Exhibition 2017 at Stoneleigh, the offering sees a collection of five wines designed to target everyone’s palate.
The selection includes Chardonnay and Sauvignon Blanc in the whites, Shiraz and Merlot for the reds and a light and fruity Rosé.
As with all Heritage products purchased from a Nisa store, sales of these wines will help to raise money for Making a Difference Locally, Nisa’s own charity.