The Growing Threat to Grocery Brands

Brexit, Brexit, Brexit. It’s hard, impossible even, to avoid it when considering the retail landscape of 2017. The leave vote kick-started a chain of events, the implications of which have already permeated the consumer and corporate world. However, when it comes to the changes happening within our grocery sector, there is more at play than the B word.

At the end of last year, the sharp drop in the value of the pound brought on by Brexit prompted the likes of Unilever and Premier Foods to warn of price increases on a whole host of FMCG branded products, such as Marmite, Oxo and Mr Kipling. Widely reported, this news, alongside the resulting fall-out between Premier and Tesco, was met with widespread concern.

Months on and many grocery brands are grappling with the double-edged sword of rising commodity prices and economic uncertainty. But it is a less talked-about trend in grocery retail that is keeping brand owners awake at night and that is the rise of own-label.

For a few years now, own-label ranges have been quietly but surely moving from the margins and into the limelight. It was back in 2011 that the balance tipped in favour of own-label, with more products launched than branded equivalents.  Once the territory of the low-income bracket, own-label has grown up and become increasingly desirable, for both retailers (who make better margins) and consumers (who appreciate the value offered).

 

 

Own Brands and PR - Wild West Comms

 

Figures released by IRI UK[1] earlier this month show we are paying more for branded products. This has very little to do with the B word, rather it is almost entirely down to a considerable drop in retail sales promotion and deals, such as the multi-buy. In relation to proportion of consumer spend, supermarket promotions are at their lowest level in 11 years. This is a long-term strategy led by the ‘big four’ supermarkets, to align their pricing to that of the discounters, who have taken considerable market share in recent years with ‘every-day low prices’.

Back to the B-word, and inflation is, of course, affecting consumer purchase behaviours; market share of supermarket-owned brands has risen 5% in the twelve weeks to 26th March[2].

With all this at play, there is every reason for retailers to invest in own-label in 2017. Brand owners and producers are countering this through a combination of new product innovation and clever marketing.

While retailers are becoming braver, it is still brands that have the edge when it comes to innovation and this is important. But it is the unrivalled loyalty that a brand attracts that must be capitalised on. There is something special about the brand-consumer relationship that own-label hasn’t yet matched. PR and marketing plays a crucial role in establishing and retaining this loyalty.

 

Laura Tomlinson - Wild West Comms

Words: Laura Tomlinson

Senior Account Director at Wild West Comms

 

 

 

 

 

 

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[1] IRi Worldwide https://www.iriworldwide.com/en-GB/insights/Publications/Price-war

[2] Kantar Worldpanel