Private-label sales set to double – Rabobank

Posted by Nicole Eckersley on 25th March 2011

canned vegetablesPrivate-label sales could account for 50% of the global food retail market by 2025, putting pressure on manufacturers of brands that do not lead their categories, research group Rabobank has predicted.

In a new research report, entitled Private label vs. Brands, Rabobank said that the share of private-label sales will likely double from 25% to 50% by 2025, driven by retail consolidation in established markets and the deveopment of modern retail in emerging markets.

Increased consumer acceptance of own label, due to the recession, the growth of the hard discount sector and an improved supply of private-labels are also held up as potential factors that could boost private-label sales.

“A-brands”, or category leaders, will “retain their importance” for retailers because they will anchor price levels, provide choice and farmiliarity, Rabobank suggested.

The real losers then, Rabobank predicted, will be manufacturers of “B-brands”, brands who do not lead their categories, who will be squeezed out of the market. According to the research firm, B-brand manufacturers will either have to invest in quality and target the premium market or specialise in producing private-label goods for retailers.

A “consolidation spree” among private-label specialists is “inevitable” to achieve economies of scale and reduce their cost base, Rabobank claimed.

“Our research shows that private label and A-brands are an inseparable combination. Like love and marriage, you can’t have one without the other. But where two’s company, three’s a crowd. This report is an early warning to B-brand suppliers to adapt their strategies to survive,” report author Sebastiaan Schreijen said.

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