Consumers are being encouraged to try cheaper own-label and tertiary brand alternatives to established brands by advertising campaigns, such as that run by hard discounter Aldi, according to Mike Fraine, R&R Ice Cream’s country manager for the UK and Ireland.
They are discovering that lower prices combined with high quality of own-label products often makes them better value for money.
R&R Ice Cream expects to increase its own-label business from 58% to around 65% over the next three years, as the hard discounters Aldi and Lidl win increasing market share from the big four high street retailers Tesco, Asda, Sainsbury and Morrisons. R&R also sells ice cream under Nestlé and Mondelz branded labels.
“Brands have got to be more effective,” remarked Fraine. “It’s always been about efficiencies, but now it’s about effectiveness to serve a market that is increasingly diverse. We have to find different solutions for selling brands in discounters and convenience channels than we do in the major multiples.”
Sales and promotions
In response to competition from own-label products, branded manufacturers often resorted to promotions to maintain sales, said Fraine. He reckoned about 70% of branded ice cream was sold on promotion.
Elsewhere, Rikin Lakhani, md of Kolak Snack Foods, which primarily (90%) supplies own-label snacks for UK retail – including the multiples and hard discounters – noted the change in consumer shopping behaviour since the recession had coincided with the expansion of the hard discounters.
“Where consumers used to go to one supermarket and do their entire shop they are now a lot more promiscuous,” said Lakhani. “Consumers are making a lot more shopping visits and are not afraid to shop around to get the best deals.”
Last month, Shore Capital analysts Clive Black and Darren Shirley said the latest monthly market share data for the British grocery trade from market research company Nielsen “records an industry where revenue weakness overall remains the order of the day”.
Store values fall
For the 12 weeks to November 7 2015, Nielsen reported that sales values in stores fell by 1.2% year-on-year (yoy), with volumes falling by 0.5%. Food deflation, currently at 3% year-on-year, according to Office for National Statistics figures, continued to be a problem, they remarked.
“For the major superstore groups, pressure also persists from the limited assortment discounters, which to our minds have ‘gone again’ in recent times with sales appreciation and so share gains accelerating,” said Black and Shirley. They noted that Aldi’s sales were around 27.5% ahead, while Lidl’s also grew strongly by 21.7% yoy over the 12-week period. “The combined UK share of Aldi and Lidl is said to be 11.1%,” they added.
Nielsen data showed that Asda continued to lag behind the other multiples, recording a market share of 15.5%, down from 16.4% for the same period in 2014. “Asda seems to be particularly negatively impacted by the limited assorted discounters’ progress,” they said. However, Morrisons and Tesco also continue to lose market share, they added.
Only Sainsbury appeared to buck the trend, outperforming its peers in underlying sales and market share and also growing faster than the market, they said. Nielsen reported that Sainsbury’s sales over the 12-week period were marginally positive at 0.4%.