During 2022, buyers and experts were surprised by the abundance of goods in Russian stores. International sanctions and the separation of major foreign brands had little effect on store shelves.
Retail chains simply switched to alternative markets, local products and … private labels.
NielsenIQ is a global expert in retail, FMCG industry and consumer behavior – notesHe reported that in 2022, sales of food products produced by retail chains increased by 35%. In 2021, this figure was only 18% – almost twice as low.
“In the background of the economic crisis, one of the most striking trends in the Russian FMCG market has become a new wave of development of private label retailers,” NielsenIQ experts say. “In March 2022, when consumers shopped without choosing certain brands, the impetus for the development of private brands was driven by massive demand.”
As a result, the share of private brands in the Russian market only for the period January-April 2022 augmented increased by 13.2% in kind and 9.4% in monetary terms. Sales in some non-food product categories increased by a third in April 2022.
Not just savings
Private brands have been developing for a long time in Europe. In some countries, they account for more than a quarter of sales: Sweden is the record holder – 52%, in Spain this figure is 41%, in Belgium – 38%. Private label for Russia is a growth trend. After all, despite all the successes, NielsenIQ experts say that the share of private brands in total sales of consumer goods has not yet exceeded 5%.
The growing popularity of own brands is primarily due to the affordability of such products.
Against the background of declining real incomes of the population, this becomes a decisive factor for many buyers and the basis of their savings strategy.
Due to the optimization of logistics costs, simpler and cheaper packaging, high turnover, the absence of large marketing and advertising investments, private label products are more affordable than similar products of well-known brands – the savings can reach 30%.
All this applies not only to goods in the economy segment. NielsenIQ states that European retail chains have evolved in recent years due to the expansion of private label lines and the creation of brands in the mid and premium price segments.
According to INFOLine, there is a similar trend in Russia. outlined In 2020, the Pyaterochka retail chain was the first to announce a change in criteria.
“Today, the trade network has more than 50 own brands in all price segments. This is more than 2800 high quality commodity products. We are systematically increasing the share of such products so that there are practically no categories left in stores, wherever they are presented, ”Elena Rudova, director of the private label department of the Pyaterochka retail chain, explained to Gazeta.ru.
it’s all about quality
According to Roskachestvo ratings, products manufactured by retail chains, as a rule, win in price and quality. Among products with high consumer characteristics, there is always more.
Still, Roskachestvo points out that there is always a risk of falling in love with a completely unscrupulous producer. We are talking about the ability of a retailer to produce hundreds of products in different categories under one brand. At the same time, tenders for production go to different enterprises, therefore, as a result, several manufacturers can produce goods under one brand. Quality control becomes the retailer’s concern.
For example, Roskachestvo conducted a survey of 97 categories and only two brands did not find low-quality products with a score of three or less. These are the Global Village of the Pyaterochka retail chain and Our Family O! Auchan networks.
Pyaterochka announced that the Russian manufacturers with whom the trade network came into contact had undergone extensive control and inspection on its behalf. The retailer is responsible for the quality of private label products with its own reputation at the federal level, so it strictly controls everything.
Stages from raw material selection to laboratory research of finished products.
As a rule, private label products are produced in the region where they are sold.
“Thanks to the well-established supply chain and convenient location of distribution centres, finished products can be delivered to store shelves as quickly as possible while preserving their freshness. In general, the control system allows not only to monitor the quality, but also to change the recipe according to the demands of buyers in a particular region,” said Elena Rudova.
It is significant that even today more than 90% of the private label products in this retail chain’s practice are highly appreciated. The company has long added the feature to rate certain products; a low rating for a retailer indicates that it is necessary to work with a supplier or reject their products altogether.
Growth prospects
With data NielsenIQ, the evolution of its own brands is a win-win situation for consumers, retailers and manufacturers alike. Russian experts also predict rapid and bright growth of private brands this year.
“Continuous evolution of private labels can be expected in both the food and non-food segments. The main factors that will contribute to the increase in the share of private label sales are the decrease in the range of well-known brands compared to the period before the start of the CBO, as well as the weakening of the purchasing power of the Russians,” says Anna Builakova, analyst at FG Finam.
According to the expert, the success of private brands of independent chains will be determined by compliance with “price/quality” expectations, competitiveness of the offer, and the awareness of retailers’ own brands.
“Increasing the share of private brands in sales has been written into the strategies of all major retailers, and we think little has changed in the current environment. “They’re probably more important,” said Artem Mikhaylin, an analyst at VELES Capital.
Expert remindedPyaterochka plans to increase the share of private brands to 27% by the end of 2023, “Intersection” – up to 26% by 2025 and Magnit – up to 25%.
Private labels are well established on essential products and the largest categories found in most buyers’ carts.
“Because the economy is currently experiencing a crisis and high uncertainty, buyers have started to approach shopping more rationally and measuredly,” says the expert.
And usually this applies to purchases in all price segments. On the other hand, according to Artem Mikhaylin, “in a private label, a retailer can be more flexible in setting prices and maintain a reasonable price-quality ratio for goods.” This means that the development of private brands is becoming an increasingly important competitive advantage for Russian retail chains.