Private Label Alcoholic Beverage Trends: Post-Downturn Implications and Opportunities

Introduction

Private label has witnessed continued growth, with own brands displacing national brands both in stores and in consumers' consideration set. Wider availability and growing sophistication has led to growing acceptance and trust. The economic downturn has reinforced private labels as a credible, yet cheaper alternative to branded goods, driving awareness and trial across demographic groups.

Features and benefits

* Utilize product, consumer and market insight intelligence to better evaluate the important strategic considerations that private label growth brings
* Understand the scale and growth of the private label alcoholic beverage opportunity by sector and country, split by category level
* Access insightful proprietary consumer opinion data highlighting the prevailing attitude towards private label alcoholic drinks versus national brands
* Identify and capitalize on the ten trends characterizing contemporary private label alcoholic beverage product development and marketing
* A dedicated focus on alcoholic beverages for more specific and salient insight

Highlights

The economic downturn led to changes in shopping patterns that will remain in the long term—the adoption of private label being a pertinent example of this. In 18 of the 20 countries covered in Datamonitor's consumer research, more than 40% of respondents said that opting for private label to save money has become more important over 2008-10
Own label market shares vary markedly by country/region. Developed markets in Europe and North America have maintained their position as the leading private brand markets, but growth is evident elsewhere as emerging market retailers grow big enough to achieve the economies of scale that helps facilitate private label development
Nearly half of consumers across 20 countries in Datamonitor's consumer research bought more private label in 2009-10. While some migration back to national brands will occur as economic circumstances improve, Datamonitor anticipates it will be less than the private label gain in many alcoholic drink categories

Your key questions answered

* What are the key trends driving consumers' propensity to purchase private label alcoholic beverage products? How do they vary by country?
* What are the 10 NPD and marketing trends reflecting own brand development in consumer packaged goods?
* What private label alcoholic beverage product formats represent the biggest promise/threat to national brands?
* What are consumers' perceptions of private label alcoholic beverages compared to national brands? How do these perceptions influence where they shop?
* What has been the impact of the economic recession on consumers' propensity to purchase private label products? How might this change going forward?
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TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
In many countries and segments, private label is outperforming the category as market penetration follows an upward trajectory and more shoppers embrace store brands 2
Obtaining value for money, including through the consumption of private labels, is a deeply embedded priority for alcoholic beverage shoppers 3
Consumers are forming more favorable perceptions of private label alcoholic drinks, which reduces the perceived compromise associated with switching to own label 4
Favorable perceptions of private label alcoholic drinks means that they can often be 'destination brands' driving grocery store choice and satisfaction 5
Private labels are being used in more sophisticated ways to aid retail branding 6
Actions for manufacturers 7
Actions for private labelers 7
THE FUTURE DECODED 19
INTRODUCTION: The growth of private label across sectors is one of the most pervasive trends influencing consumer packaged goods 19
Private label growth can be attributed to both ‘consumer pull’ and ‘manufacturer push’ 20
TREND: In many countries and segments, private label is outperforming the category as market penetration follows an upward trajectory and more shoppers embrace store brands 22
Growing numbers of shoppers are turning to private labels and many intend to continue doing so 23
Private label is accounting for an increasing amount of grocery spend, including alcoholic drinks, across most countries 27
Private label alcoholic drink spending still accounts for a relatively low percentage of the overall private label market in a given country 31
Key take outs and implications: across countries, shoppers are continuing to make private label a common basket choice 32
INSIGHT: Obtaining value for money, including through the consumption of private labels, is a deeply embedded priority for alcoholic beverage shoppers 34
The thrill and necessity of the 'bargain-hunt' continues to entice global alcoholic beverage consumers 35
Private label is generally synonymous with saving money in consumers' minds 39
Buying private label/store brands to save money has become more important to more than half of consumers in 2008–2010 43
Consumers form their value for money judgments on factors beyond lower prices and product discounts 45
Key takeouts and implications: consumers continue to be highly selective in their purchase decisions, which has been a favorable pre-requisite for private label growth 51
INSIGHT: Consumers are forming more favorable perceptions of private label alcoholic drinks, which reduces the perceived compromise associated with switching to own label 53
Consumer research routinely highlights improving perceptions of private label quality 54
With improving quality perceptions, private label alcohol beverage brands are becoming more recognized as being credible alternatives to name brands, but evidence of an 'attitude-behavior gap' exists 67
Brand loyalties are under continued threat, with few consumers in most countries attaching significant importance to brand image 72
Key takeouts and implications: private labels no longer suffer from a widespread stigma of inferior quality 81
INSIGHT: Favorable perceptions of private label alcoholic drinks means that they can often be 'destination brands' driving grocery store choice and satisfaction 83
Private label range exerts a high influence on store choice for nearly half of shoppers in many countries 85
Approaching two-thirds of shoppers are satisfied with the private label offering where they do most of their grocery shopping 88
The evidence is mixed as to whether store brands can garner store loyalty and to what extent the optimal mix is between private labels and national brands 91
Private label potentially appeals more to time-pressured consumers who want to make quick and effective choices in-store 93
Key take outs and implications: some retailer own brands are becoming ‘destination’ products that closely match shoppers' preferences, boosting the reputation of product and retailer alike 95
INSIGHT: Ten trends characterize contemporary private label alcoholic beverage product development and marketing 96
Tiered private label ranges are common across store formats and regions as retailers look to attract a broad range of consumer segments 97
Retailers are inflating the premium credentials of high-end own labels 99
Leading supermarkets are actively investing in discount lines to help counter the escalating threat posed by discounters such as Aldi 102
Private labelers are responding to consumer expectations by better involving them in the new product development process 105
Retailer brands are intensifying marketing efforts and, in doing so, embracing higher profile and more flamboyant marketing promotions 107
Retailers are aggressively delisting under-performing national brands (and replacing them with own label alternatives), and using their elevated bargaining power to impose price reductions 109
Having become compelling brands in their own right, some retailers are selling their owned brands outside of their own stores, including via online channels 111
Co-branding between private label and national brands is a likely outcome, so too is added retailer influence in the development of national brands 112
Retailers are reintroducing some national brand SKUs having realized there appears to be a optimal level of private label penetration 113
The extension of store brands into services and other areas aims to strengthen the brand equity of the retailer and drive shopper loyalty 113
Key take outs and implications: private labels are being used in more sophisticated ways to aid retail branding 115
ACTIONS 116
Actions for manufacturers 116
Determine whether to manufacture private label brands or not 116
Scrutinize and manage price gaps versus competing retailer brands 118
Create more exclusive versions of branded products to increase the (perceived) distance from private labels 120
Maintain national advertising spending to emphasize brand superiority and take the battle out-of-the-store 121
Highlight the risk of switching to a cheaper non-branded alternative 121
Consider selling differing brand formats through discounters 122
Entice and better reward consumers for their loyalty with more creative and engaging brand loyalty initiatives 123
Consider developing value-driven flanker brands, but be sensitive to the impact it can have on broader brand perceptions 124
Be transparent because it can help build brand trust and equity 125
Effectively embrace social media to have dialogue with consumers 128
Actions for private labelers 130
Determine the most appropriate strategic approach taken to manage private label development and brand perception 130
Determine what category to target 131
Use the post-recessionary climate as an opportunity to further embed private label into consumers' lives 132
Reduce the perceived quality gap by offering something truly distinctive and/or standing for something 132
Invest in enhancing the image of the store brand itself, and, in doing so, emphasize a more personal touch 133
Make a private label brand synonymous with a particular category to elevate its status in consumers' consideration set 134
Take steps to prevent private label cannibalization 134
APPENDIX 135
Definitions 135
Methodology 135
Further reading and references 137
Ask the analyst 139
Datamonitor consulting 140
Disclaimer 140


TABLE OF FIGURES
Figure 1: Private labels can be classified in various ways 19
Figure 2: The private label market is impacted by a broad range of drivers and inhibitors 21
Figure 3: Private label is generally following an upward trajectory and more consumers embrace store brands and demonstrate an ongoing intention to do so 22
Figure 4: Growing numbers of shoppers across geographic territories are turning to private labels 24
Figure 5: The search for value does not simply equate to opting for the lowest price 34
Figure 6: Obtaining value for money, including through the consumption of private labels, is a deeply embedded shopper priority 35
Figure 7: In adopting a 'recessionary mindset', consumers became more conscious of value for money 36
Figure 8: Consumers are continuing to purchase alcoholic drinks for at-home consumption more on the basis of value 37
Figure 9: Global consumers have adopted various strategies to save money when grocery shopping, including routinely buying private label/store brand products in order to save money 40
Figure 10: The fact that private labels are cheaper than most national brand equivalents, and that this drives purchaser intent, is supported by both academic and empirical research studies 42
Figure 11: Buying private label brands to save money has become more important to more than half of shoppers in 2008–2010 44
Figure 12: Consumers form their value for money judgments on factors beyond lower prices and product discounts 47
Figure 13: That product features best address one's own needs is consistently viewed as exerting a high amount of influence on how consumers across age and gender groups judge a grocery product as offering 'good value for money' 48
Figure 14: Consumers still consider the price of alcoholic beverages to form an important part of the value it offers then 49
Figure 15: Consumers are adopting private label because of a prevailing perception of improving quality parity, and the deepening relationships materializing with retail brands more generally 54
Figure 16: Perceptions of private label are changing across the majority of CPG categories 56
Figure 17: Consumers in the Americas are particularly unfamiliar with private label alcoholic drinks, meaning they are less able to form quality perceptions 57
Figure 18: Consumers are forming ever more favorable perceptions of private label alcoholic drinks 58
Figure 19: Around one in five global consumers believes that private label beers are actually superior to national brands 59
Figure 20: Many consumers admit to not noticing much of a difference between private label and national brand wines 62
Figure 21: India is the only market where more than a quarter of consumers believe private label spirits are superior to market-leading famous brands 65
Figure 22: Dutch consumers are most likely to agree with the notion that private label alcoholic drinks are good alternatives to market-leading famous names 69
Figure 23: The 'social currency' of brands is not necessarily seen as being high in most countries 74
Figure 24: Just under half of global consumers across countries demonstrated a willingness to give up favored brands in order to save money 77
Figure 25: A desire to buy cheaper brands has been prevalent amid the difficult economic circumstances characterizing 2009 and 2010 78
Figure 26: Branding considerations feature prominently as part of alcoholic beverage selection process 79
Figure 27: There is a tendency for drinkers to remain loyal to a few favorite alcoholic beverages rather than embark on widespread experimentation and brand-switching 79
Figure 28: Favorable perceptions of private labels means that they can often be 'destination brands' driving grocery store choice and satisfaction 84
Figure 29: Retailers develop private labels for many reasons, including to enhance store differentiation 84
Figure 30: The quality and quantity of private label is a mid-ranging factor in terms of the influence on where consumers shop 85
Figure 31: South Korean and Spanish consumers place most importance on the private label offering in deciding where to shop 86
Figure 32: Satisfaction with private label exceeds the relative influence that own label range has on store choice—in many instance by a large margin 89
Figure 33: Approaching two-thirds of shoppers are satisfied with the private label offering where they do most of their shopping 90
Figure 34: A notable shopper segment feels burdened by too much choice when grocery shopping 94
Figure 35: Private label is a potentially compelling solution for choice burdened, time scarce, disengaged shoppers 94
Figure 36: Ten trends characterize contemporary private label alcoholic beverage product development and marketing 96
Figure 37: Private labels can be classified in various ways 98
Figure 38: Retailers are looking to improve the premium credentials of own-brand spirits through entrants into the upmarket 'super-premium' category 100
Figure 39: Well-designed, vibrant packaging add distinction to many contemporary private label alcoholic beverage ranges 102
Figure 40: Supermarkets are pursuing a number of strategies to add value to their own branded alcoholic drinks varieties and thereby make them more competitive 104
Figure 41: The branding of Asda's new private label offering reflects a customer-centric approach to brand development that is becoming more apparent in private label marketing 106
Figure 42: Branded manufacturers and retailers can both benefit from collaborating on private label alcoholic beverage products 113
Figure 43: The extension of store brands into broader services is inevitable as retail brands become stronger 114
Figure 44: National brand players are faced with a dilemma over whether to produce private brands or not 118
Figure 45: National brand manufacturers must carefully manage price gaps versus retailer brands 119
Figure 46: Manufacturers looking to capitalize of premiumization in alcoholic beverages must excel more than their competitors in the provision of factors associated with the PPI 121
Figure 47: There are four reasons why trust- and ethos-based branding are of increasing importance 126
Figure 48: Industry players must focus on sustainability claims that are transparent 128
Figure 49: Industry players must focus on sustainability claims that are transparent 129
Figure 50: Industry players must determine the strategic approach taken to manage private label development 131
Figure 51: Retailers of private label alcohol brands must work towards reducing the perceived quality gap by offering something truly distinctive and/or standing for something 133


TABLE OF TABLES
Table 1: Consumer survey: agreement among shoppers that they are purchasing more private label products compared to one year previously, across 20 countries, by age and gender, 2010 24
Table 2: Consumer survey: agreement among shoppers that they are purchasing more private label products compared to one year previously, in 20 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by country, 2010 25
Table 3: Total private label grocery penetration (% of $ sector spend), in 20 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by country, 2004-2014 30
Table 4: Total private label alcoholic beverage penetration and spend ($ millions), in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2004-2014 32
Table 5: Consumer survey: agreement among consumers that they are more conscious of getting value for money in light of the economic downturn, across 17 countries, by age and gender, 2009 37
Table 6: Consumer survey: the extent to which consumers have chosen alcoholic drinks for at-home consumption on the basis of value more in the past six months, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2010 38
Table 7: Consumer survey: the propensity to choose alcoholic beverage products in the past six months on the basis of value-for-money, across 18 countries, by age and gender, 2010 39
Table 8: Consumer survey: changing importance attached to purchasing more private label products to save money in the previous two years, across 20 countries, by age and gender, 2010 44
Table 9: Consumer survey: changing importance attached to purchasing more private label products to save money in the previous two years, in 20 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by country, 2010 45
Table 10: Consumer survey: attention given to the amount of money consumers spend on alcohol, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2009 & 2010 50
Table 11: Consumer survey: attention given to the amount of money consumers spend on alcohol, across 18 countries, by age and gender, 2010 51
Table 12: Consumer survey: perceived superiority/inferiority of private label beer versus well known or market leading brands, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2009 & 2010 60
Table 13: Consumer survey: perceived superiority/inferiority of private label beer versus well known or market leading brands, across 18 countries, by age and gender, 2010 61
Table 14: Consumer survey: perceived superiority/inferiority of private label wine versus well known or market leading brands, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2009 & 2010 63
Table 15: Consumer survey: perceived superiority/inferiority of private label wine versus well known or market leading brands, across 18 countries, by age and gender, 2010 64
Table 16: Consumer survey: perceived superiority/inferiority of private label spirits versus well known or market leading brands, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2009 & 2010 66
Table 17: Consumer survey: perceived superiority/inferiority of private label spirits versus well known or market leading brands, across 18 countries, by age and gender, 2010 67
Table 18: Consumer survey: agreement that private label alcoholic beverage brands are good alternatives to name brands, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2009 & 2010 70
Table 19: Consumer survey: agreement that private label alcoholic beverages are good alternatives to name brands, across 18 countries, by age and gender, 2010 71
Table 20: Consumer survey: the importance of being seen with a desirable brand, in 20 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by country, 2008 and 2010 75
Table 21: Consumer survey: the importance of being seen with a desirable brand, in 20 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by age and gender, 2010 76
Table 22: Consumer survey: agreement that consumers are giving up some of their favorite brands to save money, across 17 countries, by age and gender, 2009 77
Table 23: Consumer survey: agreement that consumers tend to stick to one/a couple of their favorite alcoholic drinks brands, in 18 countries across Europe, Asia Pacific, the Americas, and Africa, by country, 2010 80
Table 24: Consumer survey: agreement that consumers tend to stick to one/a couple of their favorite alcoholic drinks brands, across 18 countries, by age and gender, 2010 81
Table 25: Consumer survey: influence of the quality and quantity of private label brands on where consumers do most of their grocery shopping, in 17 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by country, 2010 87
Table 26: Consumer survey: influence of the quality and quantity of private label brands on where consumers do most of their grocery shopping, across 17 countries, by age and gender, 2009 88
Table 27: Consumer survey: satisfaction with the quality and quantity of private label brands where consumers do most of their grocery shopping, across 20 countries, by age and gender, 2010 90
Table 28: Consumer survey: influence of the quality and quantity of private label brands on where consumers do most of their grocery shopping, in 20 countries across Europe, Asia Pacific, the Americas, and the Middle East and Africa, by country, 2010 91



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