Trade Resources Industry Views Branded Food Manufacturers Suffered Losses as Own-Label Products Continue to Grow

Branded Food Manufacturers Suffered Losses as Own-Label Products Continue to Grow

Branded food manufacturers are set to suffer further losses in market share as own-label products continue to grow in popularity,according to consumer market researcher,Kantar Worldpanel.

In the soup:Tesco's decision to stock its own-label New York Soup Co and delist New Convent Garden Soup was a sign of things to come:Kantar

The UK's own-label market accounts for 45%of total grocery sales,a figure Kantar's communications director Ed Garner predicts will rise as retailers focus more on pushing their own-label products.

Garner said that consumers'opinion of own-label products had changed from a money-saving option to a premium product that provided high-quality and value for money.

"Over time we will see unprecedented growth in this market.It is no coincidence that retailers have launched more own-label products,"said Garner."Own-label was once something you bought if you couldn't afford a brand,but with Tesco's'Finest',and Sainsbury's'Taste the Difference'ranges,these products are now seen as a premium by consumers."

Garner cited Tesco's decision last month to stock its own-label New York Soup Co and delist New Convent Garden Soup Co,as a sign of what may become a growing trend that sees fewer brands on supermarket shelves.

He was speaking following a presentation given to the Chartered Institute of Marketing's Food,Drink&Agriculture last month.

'Armageddon of branded products'

"I'm not suggesting there will be an armageddon of branded products,but all the signs are there,"said Garner.

Rob Dixon,marketing controller at New Covent Garden Soup owner,Hain Daniels,was reported at the time as having said that Tesco had clearly made a decision to invest in its own-labels and believed it could grow the soup category without a leading brand.

Tesco also delisted about 11 Hovis breads in October 2010,after the retailer refused to accept a price increase from the baker.

Richard Dodd,head of media and campaigns at the British Retail Consortium,said:"Retail space is a scare commodity and every retailer will make judgements about what the customer wants to buy.There is no question that own-label products are now competing on the same level for customer spending and retail space as main brands."

Strong brands will always demand a presence on supermarket shelves due their established reputation,but own-labels are making a claim on brand supremacy,having shaken off a reputation for being inferior,according to Dodd.

"Brands are very important and have massive reputations,so retailers stock them because it is something that a customer will want,but own-label is now competing on a level that can take a considerable slice of the market."

'Retailer whims'

One option for some branded manufacturers might be to explore the own-label market,but this carries risks as manufacturers would be at the mercy of retailer whims,warned Garner.

"The big problem with this is retailers will get multiple manufacturers to produce,say a chilled pizza,"he said."They can then play manufacturers off against each other and drop a contract at will."

This was the fate last month for Paramount Food when the loss of a contract to provide own-label pizzas to Morrisons forced it into administration.

"You have to ask yourself do I get into bed with the devil,"Garner said."I'd be amazed if Kellogg did,but some of the other brands might."

Dodd said:"It is an extremely competitive business,retailers will be continuously innovating and improving products and so will brands,it is all part of an on-going battle for consumer spending."

In July,Sainsbury boss Justin King told the BBC Radio4 programme The Bottom Line:"Own-label keeps brands honest in terms of the pricing they achieve and the quality they trade at."

Source: http://www.foodmanufacture.co.uk/Business-News/Own-label-foods-to-continue-gains-over-branded-Kantar
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Own-Label Foods to Continue Gains Over Branded: Kantar