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Argentina: leading the growth of supermarket own private label brands in Latin America

Updated: Apr 13, 2021

Due to the crisis, consumers turned to buying more value-for-money private label brand products at the large chains. In 2020, the category's turnover grew by 43% in the country, with a peak of up to 154.3% in March.

The economic impact of the arrival of the coronavirus is reflected in the search for savings in daily purchases. Argentina leads the growth of supermarket own private label brands in Latin America, with a 43.5% increase in turnover in 2020 versus 2019. The data comes from a report by NielsenIQ, which studied the performance of the category in the supermarket channel at the regional level in the year of the pandemic. Supermarkets increased their turnover by 46% in 2020, three percentage points above the growth achieved by private label brands and 10 points above the inflationary increase registered in that period, of 36%, according to Indec. During the first phase of the quarantine, private label brands were key to sustaining consumption, at a time of total uncertainty. March was the month that registered the highest volume of purchases of own labels in the region. The highest peak was reached by Argentina in week 11, with an increase of 154.3% compared to the previous year. "The growth was constant throughout the year, but the performance was different in the different months. Before the Covid-19 outbreak, positive numbers were already observed, but the year ended with a 10% increase in sales, compared to the first week of 2020 ", says Javier González, director of Retail Services at NielsenIQ. Although the trend gained momentum last year, it was already booming. "Own private label brands became an engine of sales growth. A few years ago, they represented 8% of the total sales of the channel. Today, the share reaches 13%, while the first brands reach 30%. Although there is still a gap, it tends to get smaller", details the manager. "The effect is generalized in the market. All the players in the industry registered growth, in some cases more accelerated than in others. It must be taken into account that not all chains have a high degree of development in this area, in some cases the weight is greater," he clarifies. Regarding the product mix, the basic basket had the greatest weight during 2020. Canned fish was the most chosen in the country, with a 54.6% year-on-year increase. Other foods such as oil, aseptic milk and long life, canned fish, baked goods, chicken eggs and rice stand out, and non-edibles such as cleaning and personal hygiene items stand out, among them, toilet paper, deodorants, mouthwashes and diapers for children. The NielsenIQ report revealed the supermarket channel, but there is also a growth in the private labels brands of the wholesalers. In November 2020, the billing in this channel increased by 50% year-on-year, according to the consultancy (latest data available). Although price is not the only driver of the purchase decision, it is still the main one. "The products are usually discounted between 10% and 15%, in relation to the average prices of each category," says González. Other factors also contribute: motivated by the retraction of consumption and changes in their customers' buying habits, supermarkets expanded the offer of private labels in their shelves, with the aim of offering them a greater variety of options. Higher availability translates into more sales. In addition, dissemination and promotional actions influence. "There is greater knowledge. The consumer has tried their own brands and continues to choose them as the first option when looking for a price," says the Nielsen executive. At Walmart, own private label brands grew 40% in participation compared to 2019. "It is the result of a change in consumer habits, who seek to spend less without giving up quality, but it is also related to our price proposal: customers know that when they choose Great Value or Equate carry the same quality as a leading brand, but at a 15% lower price on average ", analyzes Nicolás Pastore, manager of Walmart's Own Private Label Brand.

"Preserves and warehouse have a high level of participation. Above all, the products that are part of the basic basket, although categories such as flavored waters, yogurts, cheeses and vegetables are added frozen, being more and more requested ", says Pastore.

A pioneer in the development of the category, DIA garnered fans with products such as Canadian fries or German beer for their value for money. With more than 1000 products with its name, it offers from dairy and frozen products to perfumery and food without TACC that, according to data provided months ago, leads them to control almost 40% of the market share. To replenish the portfolio every day, it works with more than 100 suppliers.

The outlook for 2021 indicates that the assortment is expected to deepen with innovation in non-value (that is, economic) segments, with a good sales dynamics.

"The promise of value will be strengthened, since it is not only based on low prices, but on other benefits such as quality at a convenient value", anticipates González, and anticipates that, in addition, the focus will be on the basic basket and the communication about the origin of the brand.

Likewise, the price freeze has a direct impact on private labels. In this sense, the evolution of the Government programs will affect the consumption of this segment.

Finally, the Nielsen manager points out that, in addition, it is still discussed within the framework of the Gondolas Law, how this category is contemplated, in relation to the origin of the manufacturer.

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