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5 December 2008
Kuala Lumpur
The rising cost of living is proving a boon to Private Label or Store Brand sales in Malaysia, as shoppers switch into cost-saving mode to stretch their household budgets, according to latest insights from The Nielsen Company.
According to the Nielsen Retail Audit which tracks 68 grocery categories in modern trade channels (hypermarket, supermarket, pharmacy and convenience stores) in Peninsula Malaysia, prices of some grocery segments have jumped as much as 20 percent year-to-date, with food items rising by an average of 15 percent.
“Inflationary pressures are forcing cost-conscious consumers in Malaysia to adapt their grocery shopping habits and switch to cheaper alternatives, notably, Private Label options,” observed Maria Öijer Retailer Services Director, South East Asia, The Nielsen Company.
The Private Label market in Malaysia was worth RM240 million as at September 2008, translating to over 30 percent year-on-year growth. “It is early days yet for Private Label in the Malaysia market, but we have seen a sharp spike in sales momentum over the last year, fuelled by rising commodity prices,” observed Öijer.
While Private Label is still in its infancy in Malaysia, the sector is slated for stronger growth against a backdrop of inflation and consumers seeking out the best bargains. This development is substantiated by the strong growth of Private Label as compared to branded manufacturers in the modern trade channel. From February to September 2008, sales value of Private Label grew 32 percent, far ahead of the 15 percent growth in branded goods compared to the corresponding period last year.
“With Private Label shares on the increase, branded manufacturers would be wise to pay close attention and aggressively protect their brands’ equity through targeted advertising and promotion strategies,” commented Oijer.
Private Label thrives in “low-involvement” categories where the products meet shoppers’ more basic and functional needs. Leading Private Label categories include paper, basic non-food and commodity foods with low emotional brand values.
In modern trade channels, the top three product categories with the highest penetration of Private Label in terms of value share are bottled water (51%), sweetener (42%) and cooking oil (24%). In terms of growth in value share, bottled water has increased by 12 percent, sweetener by 21 percent and cooking oil by a whopping 78 percent.
“Obviously these Private Label categories are gaining traction and winning market share. And their presence is driving down prices for the benefit of consumers who are eager to trim their expenses to manage through the tough times,” said Öijer, adding that retailers can leverage Private Label to draw more shoppers into their stores and drive overall sales.
Oijer pointed out that Private Label products have most success where manufacturers have lost the edge in creating real or perceived added value, price is the only differentiator, true innovation is scarce and there is plenty of production capacity. Among the top 10 most penetrated Private Label products, four were launched as recently as 2008 - make-up remover, facial tissues, dry pasta and batteries – and command a value share of over 10 percent, proof of consumers’ warm reception to cheaper options.
Price difference is the strongest proposition for Private Label, with an average price gap of about 30 percent between the top 10 penetrated Private Labels and the branded products in Malaysia, in line with global trends. In emerging markets such as Czech Republic, Hungary and Slovakia, the price difference can be as high as 40 percent.
The development of Private Label in Asia Pacific markets remains relatively slow compared to European and North American markets. Nielsen measured a total of 4,716 private label product categories in 21 European nations in 2007, a testament to the maturity of these developed markets. In the Unites States, Private Label share of trade exceeds 15 percent.
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About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing information, media information, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters inNew York, USA. For more information, please visit, www.nielsen.com.
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