INTRODUCTION: What is private label?
The International Council of the Private Label Manufacturers Association explains that private label products encompass all merchandise sold under a retailer’s brand. That brand can be the retailer’s name or a name created exclusively by that retailer (PLMA International Council, 2024).
In addition, this organization highlights some advantages of using private label from the customer’s perspective: it represents the option and opportunity to regularly buy quality food and non-food products with savings compared to manufacturers’ brands, without waiting for promotional prices.
Private label products consist of the same or better ingredients as the manufacturer’s brands, and because the retailer’s name or symbol is on the package, the consumer is assured that the product meets the retailer’s quality standards and specifications.
This article provides an up-to-date analysis of private label trends in the food sector, both globally and in Europe.
At Aceites de las Heras we specialise in the development of private label for international clients. We collaborate with our clients throughout the process, from the choice of packaging to the design of the label, ensuring customisation to reflect the brand’s identity and make it stand out in the target market.
We make coupages adapted to the destination market and ensure compliance with labelling regulations so that the import is carried out successfully.
Our team of experts oversees the entire process, from the selection of the raw material to the delivery of the product to the destination country.
Private label continues its rise worldwide (2023-2024)
A 2024 Nielsen analysis highlights that rising inflationary pressure and the high cost of living have caused price to now be one of the key factors for many buyers, creating the space for private labels to flourish and reposition themselves in consumer perceptions.
Retailers are responding to the growing demand for private labels by investing in a multi-product strategy. In the map below, we can see the white label market shares by regions:
In 2023, private labels accounted for 19.4% of the total value of consumer goods sales globally, a figure that rises to 25.5% if Europe is analysed. In fact, Western Europe is leading the way in private label market share growth, with a market share of 36%.
Do consumers perceive private label as a lower quality product?
The origin of the private label dates back to the twentieth century in Germany during the Second World War. The serious economic situation that the country was going through caused consumers to choose low-priced products without a known logo instead of recognized brands (Comunicare agency). This trend crossed borders and reached other countries such as the US and France. The packaging used to be white and that is why the term “private label” was adopted to refer to the products under this category.
While the goal of consumers was to save on the shopping cart, the main objective of the first retailers to incorporate private label was to increase their profit margins. As a result, private label products were perceived negatively by many consumers as they were associated with lower quality, due to their affordability and lack of brand identity.
However, nowadays and thanks to the evolution of retailers’ strategies – focused on improving product quality, innovative packaging and a defined marketing strategy – the perception of private label products has improved considerably. By investing in market research to understand the consumer and developing products tailored to their needs, by 2024, 83% of consumers in Europe associate equal or better quality with private label products compared to market brands (McKinsey). Globally, PLMA’s 2021 report revealed that 75% of consumers perceived private label products as good, or even better, than market brands.
Retailers’ efforts to offer quality products under their private label have been so successful that consumers today describe private label food products as having the following characteristics:
According to the 2024 report by FMI (The Food Industry Association), 55% of respondents said that they had increased their private label purchases during the last 12 months, while 28% of respondents indicated that they bought a higher percentage of products from brands in the market.
Factors contributing to private label growth
Among the factors that have contributed to the growth of private label, we find the following:
THE STATE OF THE ECONOMY
The overall situation of the economy and population has a major influence on the success of private label food products. Currently, the increase in the cost of living around the world has led many consumers to make savings purchasing decisions at the supermarket.
RETAILER POSITIONING
Retailers have begun to use marketing techniques to promote their own brands through advertisements for white label products or through the strategic placement of their products within the store more prominently or alongside the leading brands in each category.
HEALTH AND SUSTAINABILITY
In many cases, supermarkets take steps to ensure that their private label products are made healthier, more ethically and sustainably than those of competitors, which coincides with the increasingly widespread preferences among consumers.
IMPROVED BRAND IMAGE
Retailers are spending more and more time, money, and effort effectively promoting their private labels. Many private labels now look clean and simple, but premium, moving away from the basic style that altered perception and that private labels were known for in the past.
IMPROVEMENTS IN QUALITY & GOURMET PRODUCTS
Private label food products are now better than before. Many consumers don’t even detect a difference in quality in today’s market, and some even prefer supermarket products over brand-name ones. In addition, many retailers are launching gourmet private label lines, ensuring the quality standards set by the retailer and building consumer trust.
Private label success stories in food
In the global market, we find multiple cases of retailers working with private label food suppliers to develop successful products and campaigns.
Global retail giants like Walmart and Target have been at the forefront of this transformation. The private labels Market Pantry (Target) and Great Value (Walmart) stand out. Also, continuing with examples originating in the US, Trader Joe’s is a supermarket chain famous for its wide range of private label food products. Develop exclusive items directly with suppliers.
In other areas of the globe such as Europe, Aldi and its main competitor Lidl, are known for their assortment of private label products. Aldi offers differentiated items with brands such as Specially Selected or Simply Nature, through which it has adapted its branding and packaging to a gourmet and organic image, respectively, in order to change the consumer’s perception on the shelves and to differentiate itself from other brands.
In the Middle East, retailers such as Carrefour and Lulu have also opted for private labels to boost the growth and profitability of their business.
On the other hand, in Asia, retailers such as Reliance Retail in India, AEON in Japan, and Sun Art Retail in China have grown a lot with their white label offerings.
The TOPVALU white label, created in 1974, has evolved over time with the commitment to create products from the customer’s perspective. In 2024 it celebrates its 50th anniversary by announcing its commitment to exceed customer expectations, guided by the motto “More Exciting NextGeneration Private Brands” in order to improve the daily lives of its customers through five commitments:
- Incorporate your customers’ reviews into your products
- Offer safe and environmentally friendly products
- Present essential information in an easily understandable way
- Offer products at reasonable prices
- Ensure overall customer satisfaction
In a context of rising inflation and economic uncertainty, these brands offer consumers an affordable alternative without compromising on quality. They have been able to take advantage of their knowledge of local markets to adapt products to regional tastes and preferences.
Trends and generation Z
According to Nielsen, if in 2023 the market share of private labels represented 19%, a considerable increase is expected in 2025, when they could represent 30% of total global retail sales. In addition to the factors detailed above that are contributing to the growth of private label, we find four future trends that will impact the sector.
Sustainable and ecological products
One trend that is expected to continue is the shift towards more sustainable and eco-friendly products. Consumers are becoming increasingly aware of environmental issues and are looking for products that align with their values. Therefore, private label manufacturers and suppliers will need to prioritize sustainability in order to remain competitive.
In this regard, retailers have demonstrated their ability to respond to evolving consumer preferences with their private label food products, focusing on organic, vegan, gluten-free and ethical food niches. This has allowed retailers to tap into a consumer sector that some brands have not yet reached.
The rise of e-commerce
Another trend that is likely to have a big impact on the sector is the rise of e-commerce. E-commerce has grown remarkably around the world, so retailers and manufacturers alike will need to adapt private label products to meet the demands of this growing market. This could include developing new packaging formats better suited for shipping, as well as investing in digital marketing to reach consumers through social media and other channels.
Premium products
Building an image of trust around private labels reinforces consumer loyalty. Although price is key to their success, a trend that has gained strength in large distributors is the improvement of quality to “steal” market share from manufacturer brands.
Evidence of this is the rigorous quality controls that retailers require from their manufacturers in order to approve them as suppliers. The more purchasing power the retailer has, the more quality controls it requires, which leads manufacturers to improve their production processes. This situation has caused manufacturers to look for strategies to reduce costs without sacrificing quality, so it could be said that private labels are drivers of innovation in the search for safer and more sustainable products.
It is also observed that some retailers have developed various strategies with their private label, ranging from offering a very wide range of products, to private label of different qualities within the same establishment. For example, Carrefour or Día, have first-price private labels with a very basic design and others to which they add the words “Selection” or “Gourmet” with more sophisticated designs.
Generation Z
Gen Z has grown up in the context of private labeling, which can further support their growth. According to a survey conducted by Progressive Grocer among Gen Z shoppers (born between 1997 and 2012), these young shoppers purchase private label products.
- 67% are “extremely/very” aware of private labels.
- 64% buy brands from the store “always/frequently”
- 56% are “very likely/likely” to try different private labels to find the ones they like and are good value for money.
- 41% bought more brands from the distributor last year to cope with inflation.
Private label of the food sector in Europe
In the graph below with data provided by PLMA, it can be seen that the market share of private labels in the European food sector in the year 2023/2024 is 35.2%. Switzerland leads the list with 51.8%, which means that more than half of the products in food retail are private labels. The next five countries where private label reigns supreme are Spain, the Netherlands, the United Kingdom, Portugal and Germany, in this order from highest to lowest market share.
In addition, according to Statista, with respect to the increase in European market share for the food retail sector, it can be seen that the country that has had the greatest increase is Portugal, increasing its market share by almost 4% in 2022. This is followed by Germany with 3.2% and Spain with 2.9%. In the graph below you can see these fluctuations:
This increase in consumption in Portugal is mainly due to the staggered increase in inflation with 21.5% in 2022 (the highest value since May 1985) according to the National Institute of Statistics of Portugal, which means that consumers must optimize their marginal substitution ratio to choose the product that best meets their needs. mainly economic.
“Food price inflation in Europe was 12.8% in 2023, while food sales increased by 8.6%. Discounts and private labels have benefited from this volatile market, once again being the winners of the year,” says the consulting firm McKinsey. This sales growth was likely the result of the 12.8% increase in inflation and best practices taken by companies to combat inflation such as shrinkflation.
The McKinsey study affirms the same thing that Nielsen supports about innovation in products such as packaging and new offerings of the same products, but in premium format: “Although most consumer segments remain price sensitive, some segments show a greater attraction to premium private label products and innovations.”
Private label of the food sector in Spain
Current situation
In Spain, private label was introduced in the seventies thanks to supermarket chains such as Simago and Eroski, which were pioneers in Spain in the marketing of these products. Currently, the food industry is following the global trend of growth of private labels on supermarket shelves.
As we have seen in the previous point, the market share of private label in Spain represents almost half of food sales, with 45.5% of the total. This means that manufacturers are losing market share and are being forced to design strategies to counteract this advance, investing in the development of innovative products that can compete with private label products.
If we look at the table above we can see the leading supermarket chains in Spain and their market share. Mercadona is positioned as the undisputed leader, controlling 26.9% of the market share in food distribution, and private label represents 74.5% of its business. Next on the list are Carrefour and Lidl, whose private labels account for 31.4% and 81.9% of their total sales, respectively. In the specific case of Carrefour, its goal is to reach 40% of private label business by 2026. To this end, it is carrying out actions such as centralising purchases and improving its digital strategy.
However, although Carrefour is the second chain with the largest market share, it has lagged behind when it comes to private label. In this case, Lidl continues to be the leader in private label business volume, and as we can see on its website, its business model is based on offering an optimized or reduced assortment by eliminating duplication of products and offering only those items that are in greater demand. To this we must add that 90% of its offer is made up of own-brand products and that it has been the second chain (after Mercadona) that has grown the most in 2023 both in store openings and market share.
Why do Spanish consumers choose private label foods?
While the main driver of the private label boom in recent years has been inflation, the main factors influencing Spanish consumers’ decision-making are as follows:
- Lowest price compared to the manufacturer’s brand (66%): continues to be the main reason for buying.
- Quality (50%): a large part of consumers believe that private label products are of equal or better quality than top brands.
- More variety of private label products (41%): The adoption of private label products in other food categories not considered staples has favored the increase in sales.
However, as Statista points out, there are also other reasons why consumers choose private label products:
- Ease / availability: Many consumers choose private label foods because of the ease of finding them in the supermarket.
- The own brands of some supermarkets have become the reference brands for some products.
- The products are manufactured by national and local suppliers: there is a tendency to consume local food.
- Communication campaigns (print, TV, social media): As we mentioned in previous points, retailers are investing in promoting private label products to increase brand awareness.
Private label olive oil in Spain
A more in-depth analysis of the private label sector in Spain in relation to olive oil shows that more than half of olive oils are marketed under private labels. Olive oil is considered a staple in the Mediterranean and Spanish diet, so knowing that Spain is the largest producer of olive oil in the world, consumers may not give as much importance to the brand as in other types of products.
Private label olive oil saw a slight increase in its share in volume and value in 2023, possibly due to rising olive oil prices and general inflation, which caused consumers to opt for private label olive oils. Despite a decline in marketing, private labels recorded a smaller drop (11.1%) compared to packers’ brands (14.4%).
On the other hand, private labels increased their prices by 46.5% until October 2023, a greater increase than that of bottlers’ brands (42.6%). This difference reduced the price gap between private labels and those of packers from 12% to 9%. However, the chains have taken advantage of this reduction in the price gap to revalue their olive oil. In this sense, Mercadona has been expanding and diversifying its olive oil offer, including new suppliers and introducing new products such as olive oil in spray and single-dose forms.
Conclusion
Today, and thanks to the evolution of retailer strategies, 75% of consumers consider private label products as good as manufacturer brands.
The rising cost of living around the world has led many consumers to make saving purchasing decisions at the supermarket while retailers are spending more and more time, money and effort effectively promoting their private labels and improving the quality of their private labels.
Aceites de las Heras can be your best partner, thanks to its extensive experience, its great production capacity, and its commitment to 100% Spanish olive oil.
If you want to expand your portfolio or develop your own brand of olive oil, at Aceites de las Heras we put all our know-how and the best quality at the service of your company. Thanks to our team of experts, we produce all kinds of coupages for the Horeca channel, professional distribution and retail. This is how we have managed to make our products available in more than 30 countries with our brands or with MDDs.
