Private label sector holds its own, raking in R71bn in sales
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SOUTH Africa’s private label sector has continued to hold its own, rising to command 24.3 percent of the total basket of value sales, which equates to R71 billion, according to NielsenIQ’s new client report titled the State of Private Label in South Africa.
The sector’s recent growth comes in the face of the age of lockdowns and an altered consumer reality imposed by the Covid-19 pandemic.
NielsenIQ, a view provider on consumer behaviour, said the annual sales for the 12 months to end May served to cement PL’s growth path from 2019, when its share of sales was 22.8 percent, which rose to 23 percent by May last year, and a further 24.6 percent by May this year.
NielsenIQ South Africa managing director Ged Nooy said there was no doubt that a new generation of private label “house” brands had provided the impetus and created momentum in the local retail sector during one of its toughest times and most difficult trading periods.
In terms of the origins of this uptick, Nooy said the booster effect of South Africa’s initial lockdowns last year should not be underestimated.
“For example, in March 2020, just before South Africa’s first and highest level 5 lockdown, stockpiling saw private label growth soaring to a peak of 27.2 percent in March 2021, and this strong double-digit growth was maintained throughout the second quarter of 2020. Interestingly, during this same time frame, named brands saw a decline in sales,” said Nooy.
The state of Private Label in South Africa provides a far-reaching view of the evolution of Private Label (PL) in the local market based on trended data and insights gathered over the last 10 years. All categories PL participates in, thus excluding Liquor and Cigarette categories. Its trade desk retailer benchmark includes Woolworths, Boxer, Spar Group, Pick n Pay Group, Shoprite Group, OK Foods, Clicks, Dis-Chem, Food Lovers Market, Game and PEP Stores.
According to the report, it was now realised that these types of products were no longer the no-name brands of the old, which were often perceived as “cheap” and of inferior quality.
Nooy said: “What we have seen is a diversification of PL products which now range from entry level offerings presenting high value for money, to the middle-of-the-range solid offerings, to a new generation of premium products, which represent both quality and value. This stems from more investment in the sector which has created the depth and the momentum that we see today.”
The report found that continuity of supply was a key factor during South Africa’s lockdown periods, driven by consumers’ need for quick “in-andout” shopping experiences, primarily due to health and safety concerns.
This concern also led to a sharp decline in the number of shopping trips, which meant if products were out of stock, a shopper would only return to a store in a week or a month.
Purchase opportunities were, therefore, far more limited and product availability was vital.
Big stock-ups at each trip also saw an increase in the purchase of larger pack sizes, again to reduce the number of store visits. Within this context, it was manufacturers and retailers’ ability to meet this need, via an increase in the distribution and assortment of private label products, which ultimately led to the increase in value sales.
Of the overarching product supergroups that have benefited from this growth, eight out of 10 continued to gain share in the short term. Among the many movers and shakers, Frozen Foods has seen the biggest incremental gain of R2bn in sales over the past 12months, mainly driven by consumers purchasing bigger pack sizes and more products. Unsurprisingly, the fastest growing was Healthcare with sales up by 34.8 percent in 12 months.
Looking ahead, Nooy said private label would continue to be a very good space to play in for manufacturers and retailers alike.
Meanwhile, FNB senior economist Thanda Sithole, commenting about the second quarter gross domestic product (GDP) figures released by Statistics South Africa this week, said private household consumption expenditure (HCE) grew by 0.5 percent quarter-on-quarter, contributing 0.3 percentage point to the GDP, while on a year-on-year basis HCE grew strongly by 22.7 percent.