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Private label penetration has not developed uniformly across FMCG industries; indeed the packaged food and tissue and hygiene industries have much higher private label penetration than the likes of beauty and personal care. At 14%, the tissue and hygiene industry possessed the highest presence of private label in 2015, due largely to the commoditised nature of the industry, as well as the importance of shelf price. Nonetheless, it is packaged food that takes top prize for private label sales overall, accounting for US$258 billion in 2015.
New Zealand mirrors global trends, with tissue and hygiene being the leading category for private label penetration at 15% in 2015, and packaged food accounting for an overwhelming majority of private label sales at NZ$1.03 billion. Echoing global patterns, private label penetration within the packaged food industry also varies from category to category. Private label accounted for a mere 2% of retail value sales within the confectionery, ice cream and soup categories, however; it accounted for close to a third of milk sales in 2015. Furthermore, while leading private labels (e.g. Pam’s, Homebrand, Budget, Signature Range, Select and Basics) are predominantly supermarket brands, private label products aren’t confined to supermarkets, with pet care retailer, Animates, also offering house brand products within the dog treats and bird food categories in New Zealand.
How does the private label landscape in Australia compare with New Zealand? Across the major FMCG industries, private label penetration in Australia tends to be higher, reflective of Australia’s slightly more developed private label scene. This is due in part to the presence of German discounter, Aldi. Aldi’s product range is almost exclusively composed of private label products, and the company limits its product range to around 700 items; enabling it to negotiate bulk-purchase deals with suppliers and offer lower prices to consumers. Industry players believe that Aldi poses a long term threat to Woolworths and Coles, despite the two leading supermarket chains respectively representing 33% and 28% of value sales within the grocery retailers category in 2015.
While the growth of private label has been positive for consumers and retailers alike, name-brands have sometimes suffered as a result in Australia. The supermarket landscape has become increasingly competitive, with manufacturers having to contend for shelf-space, not only against their name-brand competitors, but private label brands as well. In fact, the growth of private label in Australian supermarkets led to the closure of a Heinz Australia tomato sauce factory in Girgarre (Victoria) back in 2012. Production moved to New Zealand, which represented a boon for New Zealand growers, but this demonstrates how private label growth has the potential to negatively impact manufacturers.
This article originally appeared in FMCG Business.