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Research: The Rise of Private Label in Europe's Grocery Markets

According to the latest data from Circana, private label products have experienced significant growth across Europe's largest grocery markets, now accounting for 64% of total volume sales. This figure represents a two-percentage-point increase compared to the same period last year, indicating a continued shift in consumer preferences towards store-branded goods.

To boost volume sales in the face of overall FMCG decline, retailers have ramped up their promotional strategies, with a 15% increase in the number of promotions compared to the previous year. This has had the desired effect, as the first three months of 2024 saw a marginal 0.7% growth in volume sales. Private label promotions have been particularly aggressive, with a 36% increase in hypermarkets and a 25% rise in supermarkets. The discounter channel has seen an even more dramatic 68% increase in the volume of items sold on promotion.

While these promotional tactics have helped stem the tide of volume losses, industry experts warn of the danger of over-saturating the market with deep discounts. Ananda Roy, Senior Vice President of Strategic Growth Insights EMEA at Circana, cautions that the volume uplift from promotions is likely to be short-lived, and that true, sustainable growth will require a shift towards more organic strategies, such as shopper activation, brand experience, and innovation.

Private Label Dominance in Europe's Grocery Markets

According to the latest data from Circana, private label accounted for a staggering 64% of volume sales in the six largest grocery markets across Europe - France, Germany, Italy, the Netherlands, Spain, and the UK. This figure represents a 2 percentage point increase compared to the previous year, showcasing the growing dominance of private label products in the region. Interestingly, the overall FMCG volume sales declined by 1.2%, underscoring the importance of private label offerings in maintaining market share for retailers. Strategies employed to boost volume sales include a significant increase in promotional intensity, with 15% more promotions compared to the corresponding period a year earlier. This move has helped to slow the volume sales decline as we entered 2024, with a marginal growth of 0.7% recorded in the first three months of the year.

Promotional Strategies Boost Private Label Sales

Faced with declining FMCG volume sales, retailers and manufacturers have turned to aggressive promotional strategies to drive growth. Circana's data reveals a 15% increase in promotions compared to the previous year, with promotion penetration reaching 21% of FMCG products sold. This promotional push has been particularly pronounced in the private label space, with a 36% increase in hypermarkets, 25% in supermarkets, and a staggering 68% rise in discounters.

The goal of these promotional efforts has been to tackle the 1.2% volume sales decline seen across the total FMCG market. While this strategy has had some success, with the first three months of 2024 seeing a marginal 0.7% volume growth, Circana's experts warn that the uplift is likely to be short-lived. They caution against "over-saturating shelves with deep deals" and emphasize the need for more sustainable, organic growth strategies focused on shopper activation, brand experience, and innovation. As private label continues to gain ground, accounting for 64% of volume sales, manufacturers and retailers must rethink their approach to drive true, long-term volume growth in the European FMCG market.

Tackling Volume Losses

Manufacturers and retailers have resorted to increased promotions in a bid to shore up dwindling sales volumes. However, this promotional strategy is unlikely to provide a long-lasting solution. The volume uplift gained from such deep discounts is expected to be short-lived, as high absolute prices, low innovation, and growing private label penetration continue to impact the market. True volume growth is unlikely to return until the end of the year, necessitating a shift in focus towards organic growth through innovative tactics. This includes a greater emphasis on shopper activation, brand experience, and product innovation - strategies that can drive sustainable growth and capture the attention of consumers in a highly competitive landscape.

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