The main concern of the hundreds of food manufacturers gathered a few days ago at the Barcelona Alimentaria fair is no longer inflation and its erosion of business margins. The headache now is how to stop the rise of private label and recover sales volume. The advance of distribution brands is such that historical manufacturers such as Bimbo or Danone have been forced to close some of their plants in Spain to resize their production. A setback that has put the industry on high alert. “This must be stopped,” agreed sources from several companies in Alimentaria.
The unprecedented rise in food prices in the last two years has boosted the presence of private label brands in the shopping basket to levels never seen before: from 38.3% in 2021 to 43.4% at the end of 2023, according to data from the consulting firm Kantar. Supermarkets have relied more than ever on their own brands to lower the average ticket and retain customers, and as a consequence there has been a decline in the manufacturer's brand, which is more expensive on average. According to the NIQ consulting firm, private label sales in value increased by 9.8% in February, compared to a 3.4% increase for manufacturer brands. Sales in volume, for their part, rose by 7.1% for the former and by 0.5% for the latter.
But now that inflation in food and other consumer products has moderated (5.4% in February, almost three points above the general CPI), many manufacturers believe that the time has come to fight to recover share. .
“For a couple of months we have observed a change in mentality, now all operators are trying to gain volume, and the challenge is the distribution brand, which has advanced five points since 2021,” emphasizes César Valencoso, analyst at Kantar Worldpanel. The increase in distribution brands is general, although some product categories are dominated by these. If you look at the entire mass consumption assortment, the presence of white label is the majority in the drugstore range, with a 52.4% share, when two years before it was somewhat lower (49.2%). The share grows five points in packaged food, reaching 44.7% at the end of 2023. The balance definitively falls in favor of distributor products in certain items, such as dairy products. On the other hand, it only increases one point in individual perfumery, up to 14.5%.
Kantar sees, however, what appears to be a turning point, and estimates that the private label will grow this year at a “more moderate” pace, says Valencoso. One of the indicators that makes manufacturers breathe a little easier is the change in trend in the prices that supermarkets set for their brand items. “For six months, the price of the distribution brand no longer grows above the manufacturer's brand,” says Valencoso. It signals that the process of gaining share could begin to stabilize.
Some of the lines that many manufacturers presented at Alimentaria to increase presence in the shopping basket involve new formats (products with smaller portions and different packaging), less processed, healthier foods. “It will be an interesting year for manufacturer brands, with more innovation to differentiate themselves from the private label,” they point out in Kantar. Danone, for example, explained at the fair that it invests around twelve million euros in the development of new products.
