Business World

4-5 November 2005; Page S3/9

Norman P. Aquino, Senior Reporter

Two-thirds of consumers worldwide consider supermarket-owned or private label brands as good alternatives to other more established brands, with as many as four in five considering this the case in the developed markets of Europe, Pacific and North America.

Global Consumers are in agreement when it comes to private label quality and value for money.

Across the 38 markets surveyed by polling firm ACNielsen, the top 10 who gave the highest ratings to supermarket labels hailed from Europe -- perhaps not surprising given the strong presence of hard discounters -- led by The Netherlands (91%), Portugal (89%) and Germany (88%).

On the other hand, eight of the bottom 10 came from Asia, with Japanese and Malaysian consumers (35%) in least agreement that supermarket-owned labels were a good alternative to other brands.

"Private label awareness and acceptance in Asia and other developing markets will in part go hand in hand with the growth of the modern trade in these countries," said Esther J. Capistrano, ACNielsen managing director.

Ms. Capistrano noted that in Asia, the share of the modern supermarket trade is running at 47%, and is expected to pass 50% this year.

"In some of these markets, where the retail landscape is highly fragmented, a lot of shoppers are only just getting used to visiting supermarkets and hypermarkets regularly for their groceries, and private label is still a relatively new concept for them."

Furthermore, the attraction of major well-known multinational and local brands with a strong brand equity supported by heavy advertising means that the appeal of private label would be limited in many of these markets.

While the limits of private label are undetermined, it seems almost certain that they have not been reached, the ACNielsen survey said.

In a number of countries, category penetration of private label is significantly underdeveloped. As private label offerings are expanding into new markets and categories, global share is expected to grow.

In Switzerland, where 97% of all the categories tracked had private label entries, the total private label share was high at 45%.

In the Philippines, however, where only 26% of the categories tracked had a private label presence, the share for private label was less than 1%.

The biennial ACNielsen Online Consumer Opinion Survey, the largest of its kind, polled more than 21,000 respondents in 38 markets from Europe, Asia Pacific, North America, Latin America and South Africa.

The study asked consumers what they thought about supermarket- owned brands as an alternative to other brands in terms of quality, value for money, packaging and positioning.

The survey found that global consumers are in agreement when it comes to private label quality and value for money, with a global average of 69% agreeing these are extremely good value for money. Sixty-two percent considered their quality to be at least as good as the big brands.

ACNielsen noted that across regions, consumers in the Pacific and North America were almost unanimous, with 81% in both considering private labels as extremely good value for money.

They also agreed on quality, with 72% in North America and 70% in the Pacific considering private label quality to be at least as good as the big brands.

Europe followed closely trailed with 73% agreeing on value for money and 68% on quality.

Of those rating private labels most highly on value for money, seven of the top 10 came from Europe, with the remainder made up of Canadians (fifth with 83% in agreement), Malaysians (seventh with 82%) and Australians (tenth with 81%).

Least in agreement on value for money were the Thais (25%) and the Japanese (27%).

ACNielsen noted that from their origins in the 1960s and 1970s offering cheaper generic products, private labels have evolved along with the retailers’ brands themselves.

From a generic offering with an aggressive price and lower-quality positioning, own label brands have evolved to become almost equivalent in quality and closer on pricing in the minds of consumers.

This is particularly true in the highly developed markets of Europe, the Pacific and North America.

When asked if they thought there were products where quality really mattered and therefore unsuitable as a private label, a global average of 40% agreed, led by half the Latin Americans (51%) and Asians (48%).

"Even in highly own label-developed markets in the Pacific, two in five consumers agreed that there were certain products not suitable for private label," ACNielsen said.

A third of consumers in Europe (35%) also thought along the same line. Only in North America did nearly half of consumers (48%) disagreed.

According to the survey, consumers may be happy with the quality of private label when it comes to dog food, kitchen towels, sugar and flour, but are less convinced if they are considering products like shampoo, baby food or their favorite pasta sauce, particularly in less developed markets.

"Yet, retailers in North America appear to be convincing consumers that quality and value private label is available across other categories too."

Globally, private label products are priced 31% lower on the average than their manufacturer counterparts.

The survey noted that as competition intensifies in-store, and the perceived quality gap narrows between private and supplier brands, retailers appear to have improved the quality of their packaging.

An average of 42% of consumers disagreed that private label products had cheap, off-putting packaging, led by half the Europeans, 46% of North Americans and 45% of consumers in the Pacific, and more than two-thirds of Finland.

"At the same time, there appears to be a packaging redesign opportunity for retailers in South America, Latin America and Asia, where 44%, 40% and 38% of consumers respectively agreed that private label packaging was cheap-looking," ACnielsen said.

This was particularly felt in Hong Kong, Malaysia, Mexico and the Philippines.

Across the 38 countries included in the survey, private label sales accounted for 17% of the value sales over the 12 months ending in the first quarter of 2005. A year ago, private label sales only grew by 5%.

Paper products, plastic bags and wraps have traditionally been the strongest product area for private label sales.

While shares in this product area are still strong, now at 31%, private label refrigerated food now tops the list, with a combined share of value sales of 32%.

Private label shares in the areas of personal care, cosmetics and baby food were the smallest at 5%.