Tuna Leading Private Label Food Item In South Africaff

Private label or own brands have a lower share of the market in South Africa than the global average, according to ACNielsen. However canned tuna is the exception.

South Africa’s total private label share is 6.7%, which is much lower than the global average of 17%. However, its growth of 11% is higher than the average of 5%.

ACNielsen’s Private Label study was conducted across 110 categories from nine larger product groups, within the local market. The study analysed private label brands from Pick ’n Pay Group, Shoprite Group, Spar and Clicks, as well as delving into the performance of retailer exclusive brands from all of these retailers.

Private label brands are defined as “any brand that is sold exclusively by a specific retailer or chain of stores”.

“Europe retains its position as the most developed private label region, with private label offerings comprising 23% of the market’s value share,” says Ailsa Birch, marketing director of ACNielsen.

In emerging markets private labels make up 6% value share, an improvement on last year’s 4%. This region has by far the highest growth of 11% over the past year, which may be ascribed to the entrance of global retailers into these markets.

Room to grow

In general, retailer concentration is directly related to private label share. This means that in countries where the top five retailers comprise a large portion of the market, private label share is generally strong. Birch notes that South Africa has a high retailer concentration level, but our private label lags behind the global average, indicating room to grow.

Globally, consumers regard private labels favourably. In Europe – the region boasting the highest private label share – these items continued to grow above branded products, gaining share of the market.

Convenience shows gains

Globally, refrigerated food has the highest share of private labels, followed by the paper, plastics and wraps category. Personal care has a low private label share of 5%. Although private label offerings do exist in this category, consumers still prefer branded products. Complete ready refrigerated meals showed the strongest gain in the share of category, gaining 1.6% share on a global level.

Traditionally, private label brands are priced lower than branded products. The study found that on a global average, they are priced about a third cheaper than branded products. In emerging markets, it’s around 40% cheaper.

In some countries, however, the no name brands are priced slightly higher than manufacturer brands. This happens for one of two reasons – either the manufacturers had entered into price wars bringing down the prices of branded products or premium private label products were being offered by retailers as value-added alternatives to branded competitors.

It is interesting to see that there is no direct correlation between price differential from the market, and share of private label brands. In fact, refrigerated food, which shows the highest private label share, has the smallest price differential between branded and private label products, indicating that consumers are buying these for reasons other than price.

Who’s buying?

Globally, it’s the lower income consumers who buy more private labels. However, “in South Africa the picture is reversed: higher income consumers are the ones in our country who have access to private label goods and stores, and are thus more likely to buy such offerings,” says Birch.

Declines in local private label share

In South Africa, we have actually seen private label share decline ever so slightly over the past year (6.8% to 6.7% in the total country and 10.8% to 10.6% in major cities).

Although these declines are small, they may indicate that consumers do not see a benefit to buying private label products, beyond their price differential. It might also have something to do with the booming economic conditions we have experienced, or indicate lack of confidence in private label quality.

Although still a very small category, exclusive brands have grown above private label, at 12.3% versus private label’s 9.6%. Exclusive brands are sold only by individual retail groups, yet are not necessarily identifiable to consumers as being retailer-specific brands. Examples of these are Pick ‘n Pay’s Farmgirl or Shoprite’s Mr Pasta.

Locally, the top three categories in terms of private label share in major areas are dairy, dry food, and fridge & frozen.

The fridge and frozen private label portion show extremely high annual growths of 28.4% in value. While many categories show similar share to the global trends, some obvious opportunities present themselves to the local market: Private label items only have a 1% share in healthcare for example, as opposed to the 14% global equivalent.

Tuna leads the way

Private label brands comprise less than 10% share in over 64% of the 110 categories studied in major areas. Only two categories show private label shares of over 50%, namely scourers and canned tuna. Of the top 10 categories with private label share, most of them are necessity items such as long life milk, baked beans and dry pasta.

The highest private label spend is on fresh & frozen chicken – around R566-million a year. Canned tuna features in this top 10 list too, as well as on the list for greatest private label share gain over a year.

Spar ahead of the game

Spar has the highest private label share of all local retailers, with its share closer to the global average than any other South African retailer. Spar also has the highest private label growth in South Africa. Pick ’n Pay’s private label share comes in second followed by Shoprite. Clicks still has a low private label share but a high annual growth.

Both Spar and Pick ’n Pay are in line with global trends as their fridge & frozen categories are the fastest growers and largest private label categories. The Shoprite group, however, shows dairy growing the fastest and dry grocery is its largest private label category. Dairy is a category that also features fairly strongly in Pick ’n Pay and Spar.

Across all three retailers, home care, personal care and confectionery show low private label performance. Globally personal care is not a strong private label category. However, both home care and confectionery feature fairly well in other countries, indicating some opportunities for private label in South Africa.

Most of the private label spend in South Africa comes from the upper LSMs, with only Spar and Shoprite having a notable presence in LSMs 1-4. Pick ‘n Pay private label has the highest total awareness, followed by Shoprite. Although Spar has such a high private label share, it only ranks third in terms of awareness.

The way forward

In developed markets, 85% of consumers believe private label provides a good alternative to branded products, and a third believe they offer higher quality than branded. In South Africa, we have not yet seen such levels of confidence.

Both retailers and manufacturers can use private label opportunities: retailers need to position their offerings based on quality as well as price; and communicate this value proposition to consumers. This can be done by adding items that fulfil consumer needs, rather than simply competing with existing items at lower prices.

Manufacturers, on the other hand, need to understand how best to provide consumers with value for money offerings, both in good and bad economic climates. As brand owners, manufacturers can benefit by retaining their position as trend setters within categories, justifying their prices; and differentiating their branded items based on quality.