The battle for the supermarket floor between private label and branded goods has not subsided in the aftermarth of the GFC.  Having been given permission to re-assess what constitutes value, consumers are continuing to show growing interest and trial of private label, even in categories traditionally resistant to the threat. 

Branded goods face the prospect of further erosion in their market, unless they’re able to convince shoppers that, at a higher price point, their product is tangibly or emotionally better than the competition.  Alarmingly for brands, perceptions of poor quality, inferior status image, poor packaging and lack of innovation, which are still associated with private label, no longer turn us off – a large portion of Australians buy despite these concerns.  Let’s look at the reasons behind this phenomenon.

Private label’s growth (to over 20% of the market) was accelerated greatly by the economic downturn, but when we look at the motivators behind its purchase, we find that consumers are buying it for a multitude of reasons.  People opt for the cheaper private label offer to save money to spend on the family, out of the belief that brands are all hype and not of superior quality, and to fulfil a desire to display thrift.  We can group private label buyers into six distinct segments:

• The Committed Cost Cutters (12% of the population):  Who view buying private label as a responsible use of their often limited family budgets and are perfectly happy with the quality.
• The Smart Selectors (24% of the population):  Who believe that brands are all hype and are happy that they can see through them to know that private label products are really just the same thing.
• The Success Symbolisers (30% of the population):  Often young, this segment feels that their budget has forced them into private label. They are not convinced of its quality and feel self conscious about buying it.
• The Label Lovers (11% of the population):  Will sneak a private label product or two but only if no one sees – they’re put off by poor packaging and a lack of innovation.
• The Belt Tighteners (10% of the population):  Often facing tougher circumstances due to the recession they feel forced into purchasing private label due to their finances but are hoping it’s just a temporary thing.
• The Brand Believers (13% of the population):  Feel strongly that brands are better and are annoyed that Private Label products are taking over the shelves.

The message for branded manufacturers is clear – be complacent at your own risk.  We can say with certainty that, the smartbuys, homebrands, and black ‘n golds will continue to grow into serious threats to brands.  Consumers have a new purchasing mentality, a desire to be thrifty with their spending and are learning to trial private label as it might be just as good. 

There is a need to understand how shoppers evaluate the private label offer in your category.  Purchasing behaviour is being driven by a variety of motivation and does not always reflect loyalty to private label, but can also be an indication that branded manufacturers have few true ‘brand believers’.  The implication for retailers and manufacturers is there is no one-size-fits-all approach to tackling the challenge of private label.

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