Own-labels predicted to rise as inflation strikes food prices

FinanceFMCG

Own-label products are set to rise as inflation strikes the prices of popular brands, a report by IRI has predicted.  

According to the research, retailers will “strategically … hold prices of private labels” in categories which they wish to increase penetration and grow value sales. 

The company’s bi-annual ‘FMCG Demand Signals’ report reveals that supermarkets failed to capitalise on the rising FMCG market during the Covid-19 pandemic. 

The report confirms that although supermarkets were successful in widening the price gap between their own-brand lines and private labels by almost 100 basis points (BPS), branded FMCG labels in Western Europe grew by a year-on-year increase of 0.6 per cent of £35 billion over the last year. 

READ MORE: Unilever battles ‘unprecedented’ inflation with price hike

The company explained that customers “sought assurance from buying recognised and trusted brands … despite retailer-owned private labels widening the price gap.”  

However, the platform predicts that the major brands are set to pass the increasing cost of inflation directly on to the consumer, making their products less viable purchases against own-brand labels. 

“As the indexed price gap widened between national brands and private labels, you would have expected to see shoppers opting for the substitutes that offered better value,” IRI Senior vice president for strategic growth insights Ananda Roy said. 

“Surprisingly, this didn’t happen … consumers chose trusted, nationally distributed brands. 

“As inflationary measures hit parts of Europe and national brands raise their prices, retailers must decide exactly where they will allow price increases flow directly through to consumers. 

Roy added: Undoubtedly, we will see price hikes for many staple brands. 

“Major supermarkets and discounters … may decide to hold back and offer more affordable prices.” 

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