Private label ratio soars by Foodweek on August 05, 2010 Retweet The sweet taste that Australians developed for private labels during the global financial crisis shows no sign of turning sour as economic conditions improve, with business information research and analysis group IBISWorld forecasting strong growth in established and emerging markets.
According to IBISWorld, private labels account for nearly one quarter of Australias $70 billion grocery market, with their quickly gained 23 per cent share set to climb above 30 per cent in the next five years. And IBISWorld predicts that Australias liquor market will be next one in which private labels make their presence felt, with retail powerhouses Coles and Woolworths behind their forecast rapid rise.
IBISWorld says that private labels account for 20% of annual grocery sales for Australian giants Coles and Woolworths, with the countrys discount supermarkets, including price-conscious Aldi which has opened more than 200 outlets in the past nine years, having three per cent of the domestic market.
IBISWorld GM (Australia) Robert Bryant says that growth in private label groceries has outperformed traditional branded groceries consistently for quite some time, with private labels boasting the lions share of the market in some sectors following year after year of expansion.
In certain sectors, such as dairy, private label growth has been dramatic, with private label milk sales rising from 25 per cent of supermarket milk sales in 1999 to a massive 52 per cent last year, Bryant said.
This is due to the common perception that branded products are not necessarily of a higher quality within specific segments of the supermarket, particularly the dairy aisle. The same applies to other staples such as eggs, flour and sugar, all of which have enjoyed solid private label growth to the extent where more than one quarter of all purchases of these items are of private labels.
Other products that have made headway in the private label arena include bread, cereals and pet food, while private labels are starting to gain traction in categories formerly under a branded label stranglehold confectionery is a prime example because of their price competitiveness.
Talking demographics, IBISWorld says that private labels are very popular with Australias low-income families, accounting more than 30 per cent of their grocery bill. Slowly but surely, Coles, Woolworths and other retailers are converting young single people (5 per cent), couples without children (5 per cent) and high-income families (15 per cent) to private labels, predominantly through in-store promotional campaigns.
Major supermarkets are spending big bucks on activities aimed at blurring the line between branded products and their own in-house fare, such as the New Select range that Woolworths markets as being of high quality, to attract private label buyers from all walks of life, Bryant said.
IBISWorld says that it is not just in their supermarkets that Coles and Woolworths are engaging in promotional campaigns designed to shift Australian consumers towards private labels. What has happened in their supermarkets for several years is now happening in their liquor stores.
Liquor represents the next big growth opportunity for private labels in Australia. IBISWorld forecasts private labels will account for more than 10 per cent of the Australian wine market by 2013 and sales of private label beers in this country will double over the next three years, Bryant said.
With 45 per cent of Australias liquor retailing market between them a figure that will increase as they open 270 more big-box stores between them over the coming years Coles and Woolworths are placed ideally to drive and benefit from the private label liquor growth IBISWorld is predicting.
IBISWorld says that Woolworths has dived into the private label liquor market, with its own-brand wine sales reportedly the biggest growth area in its liquor retailing business over the first half of 2009-10.
Woolworthss private label liquor brands include Baily & Baily, Crittendon and Vivant wines, Dry Dock and Platinum Blonde beers, Mishka vodka, Napoleon 1875 brandy and Vivant sparkling wines, while IBISWorld understands Woolworths has lodged trademarks for other new labels, Bryant said.
When, in May 2009, Woolworths acquired its 25 per cent stake in Western Australia boutique brewer Gage Road it agreed to buy 350,000 cases of beer annually to sell through its Dan Murphys and Safeway Liquor retail outlets as well. When Gage Roadss expanded Palmyra brewery opens later this year its output capacity will increase to 1.2 million cases of beer per year, producing both private label drinks for Woolworths and its own brands for exclusive sale at Woolworths-owned stores.
IBISWorld says Coless private label beer brands include Hammer N Tongs, Maxx Blonde, Tasman Bitter and Tasman Golf, while Robinsons Marlborough Sauvignon Blanc and Pensilva McLaren Vale Shiraz are just two of its private label wine offerings.
Both Coles and Woolworths have invaded the territory of traditional brands with the introduction of their own private label drinks in the burgeoning low-carbohydrate beer market, Bryant said.
Fosters raced out into an early lead in the low-carbohydrate beer market with its Pure Blonde brand but since Coles and Woolworths launched their private labels Maxx Blonde and Platinum Blonde respectively which are both priced below the Fosters product, Pure Blondes sales have declined sharply, falling by 15 per cent in the last year, thereby reducing its overall share from 50 per cent to 42.5 per cent.
IBISWorld says the private label experience overseas, particularly in the US and the UK, demonstrates that they will continue to boom in Australia for many years to come.
According to IBISWorld, private labels account for more than one third of the huge American grocery market, while the British numbers are even more astounding. In the UK, private labels make up more than half of its grocery market and, thanks to the sale of private label drinks through supermarket chains such as Asda, Tesco and Sainsburys, almost 30 per cent of its liquor market, Bryant said.
If you think private labels are big business in Australia now, you have seen nothing yet."
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