Research and Markets have announced the addition of the "Supermarket Own Labels Market Assessment 2003" report to their offering.

With a 38.5% value share of grocery sales in 2002, the UK own-label market is the most developed in Europe. One reason for this is the particularly high level of retailer concentration in the UK compared with other European countries. This concentration has enabled retailers to harness the economies of scale that are so important in successfully developing own labels.

Since the late 1990s, there has been a much greater emphasis on premium-quality own labels. The creation of premium own-label sub-brands — e.g. Tesco's `Finest' and Sainsbury's `Taste the Difference' — is symptomatic of the extent to which retailers are seeking to enhance their brand identity and exploit sales opportunities to different target groups. Increased levels of disposable income and strong consumer demand (despite a weakening of other sections of the economy) have also been factors behind the greater focus of retailers on quality and premium own-label ranges. Creating a quality image is, therefore, an important element in encouraging own-label sales.

Price is an important weapon in what is now an extremely competitive retail environment in the UK. A number of the key grocery multiples have reduced their prices, including steep cuts in own labels, in efforts to attract customers. Own-label prices are easier to cut than brands — as the supermarkets own their brands, they therefore have larger profit margins on them.

Retailers' commitment to own labels is seen by the close relationships they have with their suppliers. Some companies are almost solely reliant on the manufacture of own labels. Moreover, major branded suppliers have also become increasingly involved in manufacturing own brands. However, this close relationship will be tested as competitive pressures and substantial investments by the retailers put pressure on suppliers to reduce their prices.

Retailers and suppliers have worked particularly closely in product areas such as chilled ready meals. This sector is probably the best example of the extent to which own labels have sought to exploit sales opportunities to various customer target groups. Consumers' desire for convenience products of a high quality, combined with their ability to afford such products and increased appreciation of different cuisines, lay behind the development of the sector, where growth has been spearheaded by retailer own labels.

At the same time, own labels also have a substantial share within commodity-type product sectors, such as frozen and canned foods. In other sectors — for example, yoghurt and chilled desserts — own labels have come under growing pressure as a result of increased polarisation between premium and value brands. This is especially applicable to the yoghurts sector, where the combined share of retailer own labels has declined.

While impulse outlets have been seriously challenged in sectors such as bagged snacks and ice cream, thereby favouring the grocery multiples and own labels, the major supermarket chains are nevertheless keen to extend the reach of their food by acquiring or developing a wider variety of outlets, be they neighbourhood, high-street or petrol station-type outlets; for example, Tesco Express outlets. Key to Marks and Spencer's growth strategy is the development of the Simply Food network of stores, which are smaller units of around 3,000 square feet, located in high-traffic areas where customers live and work. These stores stock around a third of Marks & Spencer's food range, with the emphasis on meal solutions, whether this be a cup of coffee and croissant in the morning, a sandwich at lunch or an Indian meal and bottle of wine bought on the way home.

We forecast that the overall share of own labels within the UK grocery market will increase slightly and settle at around 39% by 2007. This growth assumes an increased share for higher-priced/premium ranges and continued commitment to value-added sectors such as ready meal and snacking products. The forecast also takes into account some ambitious targets in terms of the opening of smaller, convenience-type outlets by some retailers between 2003 and 2005. Involvement in fresh foods will also help boost own-label sales, as will relative stability in macro-economic factors.

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REPORT DATA SUMMARY:

Supermarket Own Labels Market Assessment 2003
Category: Retailing & Services
URL: www.researchandmarkets.com

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