Private-label products will take over Australian supermarket shelf space in the next five years

Posted by AFN Staff Writers on 31st July 2012

Private-label products in Australia will increase strongly in the coming five years. Business information research firm IBISWorld forecasts the share of private-label products will account for over 30% of Australian supermarkets sales by 2017-18.

According to IBISWorld General Manager (Australia), Ms Karen Dobie, private-label products have been one of the supermarket industry’s fastest growing segments over the past decade.

“In 2007-08, private labels accounted for just 13.5% of total supermarket sales – meaning the segment has grown by more than 85% over the past five years”, Ms Dobie said.

In dollar terms, Australians are expected to spend $85.9 billion on groceries in 2012-13, with IBISWorld tipping $21.6 billion of this will be spent on private-label products, up from $19.7 billion in 2011-12 and $9.96 billion five years ago.

Looking forward, Ms Dobie said this figure is expected to hit $31.8 billion by 2017-18, representing growth of nearly 50% when compared to five years ago.

“The recessive economic climate has been a strong driver of private-label growth. Households have been reining in spending, paying off debt and increasing savings. This, coupled with an increase in the range of private-label products available, has led many consumers to make the shift to home brands”, Ms Dobie said.

Growth in premium product private label will blur the line between home brands and branded products, leading to more-aggressive competition across the Australian grocery industry.

“Branded producers have responded to private-label growth by discounting their products to remain competitive. However, the dominance of Coles and Woolworths means that they are likely to give preference to their own brands in terms of spacing and design allocations – placing continued pressure on the big brands”, Ms Dobie said.

“This can be detrimental to branded producers as their share of shelf space is eroded by home brand products,” she added.

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