Supermarket Own Labels

Published by: Key Note Publications Ltd

Published: Jun. 1, 2007 - 142 Pages

Table of Contents

1. Introduction

BACKGROUND

REPORT COVERAGE

DEFINITION

Food

Drink

Non-Food

2. Strategic Overview

EVOLUTION OF OWN LABELS

KEY ISSUES

Consolidation Among Grocery Retailers Tilts Market In Favour of Own Brands

Technological Developments

Product Reformulation

Drive Upmarket and Growth of Sub-Brands Continues

Own-Branded Goods Pose Increasing Threat To Brands

Multiples Increase Focus On Non-Food Own Brands

MARKET DYNAMICS

Market Size

Table 1: The Total UK Grocery and Own-Label Market by Value (£m at rsp and %), 2002-2006

Figure 1: The Total UK Grocery and Own-Label Market by Value (£m at rsp), 2002-2006

COMPETITIVE STRUCTURE

Retailing

Table 2: Sales Through `Predominantly Food Stores' at Current Prices (£m at rsp and index 2000=100), 2002-2006

Table 3: Sales Through `Predominantly Food Stores' by Type of Store at Current Prices (index 2000=100), 2002-2006

Table 4: Market Share of UK Grocery Sales by Major Grocery Outlet by Value (%), 2006

Figure 2: Market Share of UK Grocery Sales by Major Grocery Outlet by Value (%), 2006

Own-Label Suppliers

PROMOTIONAL ACTIVITY

Table 5: Main Media Advertising Expenditure on Food, Drink and Household Goods Brands (£000), Years Ending December 2005 and 2006

THE CONSUMER

MARKET FORECASTS

3. Foods

CHILLED READY MEALS

Background

Market Size

Table 6: The Total UK Chilled Ready Meals Market by Value at Current Prices (£m at rsp), 2002-2006

Figure 3: The Total UK Chilled Ready Meals Market by Value at Current Prices (£m at rsp), 2002-2006

FROZEN FOODS

Background

Market Size

Table 7: The Total UK Frozen Foods Market by Value at Current Prices (£m at rsp), 2002-2006

Market Sectors

Table 8: The Total UK Frozen Foods Market by Sector by Value at Current Prices (£m at rsp and %), 2006

Meat and Meat Products

Poultry and Poultry Products

Fish and Fish Products

Ice Cream

Ready Meals (Excluding Pizza)

Potato Products

Cakes and Desserts

Pizza

Vegetables and Fruit (Excluding Potatoes)

Vegetarian Foods

Share of Frozen Food Taken by Own Labels

Table 9: Market Share of Frozen Food Sales Taken by Own Labels by Value (%), 2006

DAIRY PRODUCTS

Background

Market Size

Table 10: The Total UK Milk and Dairy Products Market by Value at Current Prices (£m at rsp), 2002-2006

Market Sectors

Table 11: The Total UK Milk and Dairy Products Market by Sector by Value at Current Prices (£m at rsp), 2006

Liquid Milk

Cheese

Yoghurts and Chilled Desserts

Yellow Fats

Figure 4: The Total UK Milk and Dairy Products Market by Sector by Value at Current Prices (%), 2006

DRY GROCERIES

Bread and Morning Goods

Bread

Biscuits

Breakfast Cereals

Confectionery

Bagged Snacks

DELICATESSEN PRODUCTS

CANNED FOODS

Background

Market Size

Table 12: The Total UK Market for Canned Foods by Value at Current Prices (£m at rsp), 2002-2006

Market Sectors

Table 13: The UK Market for Canned Foods by Sector by Value at Current Prices (£m at rsp), 2002-2006

Figure 5: The UK Market for Canned Foods by Sector by Value at Current Prices (£m at rsp), 2002-2006

Vegetables

Fish

Soup

Meat

Fruit

Pasta

Share of Canned Foods Taken by Own Labels

Table 14: Market Share of Selected Canned Foods Taken by Own Labels by Value (%), 2006

SAUCES

Soups

4. Drinks

SOFT DRINKS

Table 15: Leading Brands in Carbonates and Concentrates/RTDs by Flavour or Type, 2006

ALCOHOLIC DRINKS

Background

Market Sectors

Beer and Lager

Wines and Champagne

Spirits

HOT BEVERAGES

5. Non-Foods

HOUSEHOLD CLEANING PRODUCTS

Laundry Aids

TOILETRIES

PAPER PRODUCTS

PET FOOD

6. An International Perspective

Introduction

EUROPE

THE US

7. PEST Analysis

POLITICAL FACTORS

ECONOMIC FACTORS

Gross Domestic Product

Table 16: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2002-2006

Household Disposable Income

Table 17: UK Household Disposable Income Per Capita (£), 2002-2006

Inflation

Table 18: UK Rate of Inflation (%), 2002-2006

Unemployment

Table 19: Actual Number of Unemployed Persons in the UK (million), 2002-2006

SOCIAL FACTORS

Population

Table 20: UK Resident Population Estimates by Sex (000), Mid-Years 2002-2006

TECHNOLOGICAL FACTORS

8. Consumer Dynamics

OVERVIEW

Table 21: Summary of Responses (% of adults), 2006

THE QUALITY OF OWN LABELS

"Shops' Own Brands Are Identical In Quality To Well-Known Brands"

Table 22: Attitudes Towards the Quality of Own Labels (% of adults), 2006

"Shops' Own Brands Are Not As Good Quality As The Well-Known Brands"

Table 23: Attitudes Towards the Quality of Own Labels (% of adults), 2006

"Shops' Own Brands Are Better Quality Than Well-Known Brands"

Table 24: Attitudes Towards the Quality of Own Labels (% of adults), 2006

REASONS WHY SHOPS SELL OWN LABELS

"Shops Sell Their Own Brands To Offer Lower Prices"

Table 25: Perceptions of Why Retailers Offer Own Labels (% of adults), 2006

"Shops Offer Own Brands To Increase Their Margins"

Table 26: Perceptions of Why Retailers Offer Own Labels (% of adults), 2006

"Shops Sell Own Brands To Increase Choice For The Consumer"

Table 27: Perceptions of Why Retailers Offer Own Labels (% of adults), 2006

"Shops Sell Their Own Brands To Gain More Customer Loyalty"

Table 28: Perceptions of Why Retailers Offer Own Labels (% of adults), 2006

"Shops Sell Their Own Brands To Be Different From Other Retailers"

Table 29: Perceptions of Why Retailers Offer Own Labels (% of adults), 2006

OWN-LABEL PRICES

"Shops' Own Brands Are Lower In Price Than Well-Known Brands"

Table 30: Perceptions of Own-Label Prices (% of adults), 2006

"Shops' Own Brands Are Either Identical Or Higher In Price Than Well-Known Brands"

Table 31: Perceptions of Own-Label Prices (% of adults), 2006

INVOLVEMENT OF RETAILERS IN CREATING OWN LABELS

"Shops Tend To Think Up Ideas For Their Own Brands But Do Not Usually Manufacture Them"

Table 32: Perceptions of Retailer Involvement in Creating Own Labels (% of adults), 2006

"Shops Tend To Manufacture Their Own Brands Themselves"

Table 33: Perceptions of Retailer Involvement in Creating Own Labels (% of adults), 2006

CONSUMER PURCHASING PATTERNS

"I Try To Buy Brands Instead Of Shops' Own Brands Where Possible"

Table 34: Consumer Purchasing Patterns for Own Labels (% of adults), 2006

"I Buy More Shop Own-Brand Products Than I Did 2 Years Ago"

Table 35: Consumer Purchasing Patterns for Own Labels (% of adults), 2006

"I Am More Likely To Opt For Shops' Own Brands For Items I Buy More Of"

Table 36: Consumer Purchasing Patterns for Own Labels (% of adults), 2006

9. Company Profiles

RETAILERS

ASDA Group Ltd

Corporate Strategy

Strengths and Weaknesses

Innovations

Profitability

Table 37: Key Company Data for Wal-Mart Stores Inc ($m), Years Ending 31st December 2002-2006

Future Company Developments

The Co-operative Group

Corporate Strategy

Own Labels

Profitability

Table 38: Key Company Data for The Co-operative Group (£m), Years Ending 12th January 2003-2005

Future Company Developments

Iceland Foods

Corporate Strategy

Own Labels

Profitability

Table 39: Key Company Data for Iceland (£000), Years Ending 31st March 2004-2006

Future Company Developments

Marks and Spencer PLC

Corporate Strategy

Own labels

Profitability

Table 40: Key Company Data for Marks and Spencer PLC (£m), Years Ending 30th March 2005 and 2006

Future Company Developments

Morrisons

Corporate Strategy

Own Labels

Profitability

Table 41: Key Company Data for Morrisons PLC (£000), Years Ending January 2004-2006

Future Company Developments

J Sainsbury PLC

Corporate Strategy

Own Labels

Profitability

Table 42: Key Company Data for J Sainsbury PLC (£m), Years Ending 31st March 2003-2006

Future Company Developments

Somerfield PLC

Corporate Strategy

Own Labels

Profitability

Table 43: Key Company Data for Somerfield PLC (£000), Years Ending 30th April 2003-2005

Future Company Developments

Tesco PLC

Corporate Strategy

Own Labels

Profitability

Table 44: Key Company Data for Tesco PLC (£000), Years Ending 25th February 2004-2006

Future Company Developments

Waitrose Ltd

Corporate Strategy

Own Labels

Profitability

Table 45: Key Company Data for John Lewis Partnership PLC (£000), Years Ending January 2003-2007

Future Company Developments

SELECTED OWN-LABEL SUPPLIERS

Ashbury Confectionery Ltd

Corporate Strategy

Profitability

Future Company Developments

Greencore Group PLC

Corporate Strategy

Profitability

Future Company Developments

Robert McBride Ltd

Corporate Strategy

Profitability

Future Company Developments

The Snack Factory Ltd

Corporate Strategy

Profitability

Future Company Developments

Uniq PLC

Corporate Strategy

Salads

Ready Meals

Sandwiches

Fish

Desserts

Sauces, Dips and Dressings

Profitability

Future Company Developments

10. The Future

MARKET FORECASTS

Table 46: The Total Forecast UK Grocery and Own-Label Market by Value (£m at rsp and %), 2007-2011

Figure 6: The Total Forecast UK Grocery and Own-Label Market by Value (£m at rsp), 2007-2011

11. Consumer Confidence

METHODOLOGY

KEY FINDINGS THIS QUARTER

THE WILLINGNESS TO BORROW

Confidence Improves

Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007

Willingness to Borrow Slips Slightly

Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), February 2006-2007

SPENDING FROM SAVINGS

Slight Increase in Spending from Savings

Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007

Saving Grows in Relative Importance

Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), February 2006-2007

12. Further Sources

General Sources

Publications

Government Publications

Other Sources

Bisnode Sources

Abstract

Own labels are taking an increasing share of the overall grocery market, driven by the growth of premium products, the expansion of sub-brands such as organic and better-for-you brands, the multiples' expansion into non-food areas, and the growing dominance of retailers over branded-goods suppliers. In 2006, own labels accounted for 40% of grocery sales, according to Key Note estimates, up from 38.5% in 2002.

Own-label premium ranges such as `Finest' and `Taste the Difference' are certainly now integral to the Tesco and Sainsbury's brands, respectively, and draw on a valuable consumer demographic to offer healthcare, beauty, home care, homeware and clothing products, as well as financial services. The multiples are also now increasingly focusing on non-food areas in general and are now intent on increasing sales of their own-branded goods in these areas.

The growing concentration of the retail market has also resulted in a shift in bargaining power in favour of the retailers and away from the suppliers. According to a report for the Competition Commission, the growing tendency to source on a national or international basis has widened the supply base available to grocery retailers and increased the extent to which they can use alternative suppliers, `thus increasing their bargaining power with respect to individual suppliers'.

The rise of own-brand products clearly poses a threat to manufacturers; manufacturers of branded products face increasing competition for shelf space with own brands. However, the development has also had positive effects, as manufacturers have responded to these new competitive pressures by increasing productivity, consolidating and making efficiency gains. This has kept margins, at least for the larger suppliers, broadly healthy. However, product innovation may have suffered, as retailers' rapid imitation of branded products reduces the rewards for innovation.

Over the past 10 years, the rise of the `branded' own brand has been a major feature of the market. Tesco's Finest and Sainsbury's Taste the Difference are now major brands in their own right and most of these products are also supported with advertising campaigns in the national press and on television. The famous television chef Jamie Oliver has a contract with Sainsbury's and often appears in adverts promoting products from across the own-label ranges.

In the consumer research commissioned exclusively for this Key Note Market Assessment report, 85.5% of respondents thought that own labels were cheaper than well-known brands. Only 16.1% believed own labels to be identical to, or higher in price than, well-known brands. Less than half of all respondents said they tried to buy brands rather than own brands where possible and two out of every five consumers said that they were buying more brands than they did 2 years ago.

Key Note forecasts that the overall share of own labels within the UK grocery market will rise to 42.2% in 2011, reflecting the growth of premium goods and the expansion of own-label penetration into areas where they currently hold a relatively low share of the market. However, Key Note believes that although own brands can continue to make inroads into the branded goods' market share, there are limits on how far own brands can expand. Certain goods seem to have such a strong heritage and high level of brand awareness that they may well be invulnerable; for example, brands such as Coca-Cola and Kellogg's. In addition, consumers are always likely to want a benchmark, which they can use to gauge quality and price. Thus, it is unlikely that the supermarkets will be able to have a mono-brand strategy, such as that of Marks and Spencer.

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