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Brands - Are Supermarkets Squeezing Out Brands? - UK - February 2009

Supermarkets’ own-label offerings have long been a significant part of the UK food sales, holding a share of nearly 29%.

The multiple retailers now manage a sophisticated own-label portfolio with different positionings responding to consumer needs and have been rewarded by continued growth in market share.

During the last 12 months, with the economic downturn accelerating towards the end of 2008, the popularity of own-label has intensified. As consumers have started to feel the pinch, they have switched from branded products to own-label in order to save money. As the UK enters recession, continued growth is expected in 2009, reinforcing the competition between own-label and brands.

This report analyses the changes taking place in the competition between supermarkets’ own-label and manufacturer brands to assess the extent to which the latter are being squeezed out of the market.

Key report themes
  • Which food categories are most vulnerable to a shift from manufacturer brands to supermarkets’ own-label?

  • Are any shifts to own-label induced by economic recession permanent or are they only temporary?

  • How have consumer perceptions and attitudes towards supermarkets’ own-label changed?

  • What are the drivers behind the increased popularity of own-label?

  • Which groups of consumers are most likely to shift to own-label and which are likely to stay loyal to brands?

  • What strategies can manufacturers adopt to maintain or increase their market share?

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Table of contents

  1. Issues in the Market

      • Key themes
        • Definitions
        • Future Opportunities

          • Discounted brands
            • Upping the message
            • Market in Brief

              • Own-label is gaining popularity
                • Economic conditions favour own-label
                  • Shift to own-label is not inevitable
                    • Retailers behaving like brands
                      • Consumer preferences vary by category
                        • Discounting the near future
                        • Internal Market Environment

                          • Key points
                            • Food price inflation
                              • Figure 1: Food price inflation, annual rate, 1999-2008
                            • Own-label – a good way to save money
                              • Figure 2: Ways of saving money when doing grocery shopping in the last 12 months, September 2008
                            • A better perception of own-label
                              • Figure 3: Trends in attitudes towards own-label, 2004-08
                            • Brand loyalty is eroding
                              • Figure 4: Trends in brand loyalty, 2004-08
                            • Attitudes towards innovation
                              • Figure 5: Trends in willingness to try new brands, 2004-08
                          • Broader Market Environment

                            • Key points
                              • Consumer confidence
                                • Figure 6: Trends in unemployment, 2003-13
                                • Figure 7: Nationwide index of consumer confidence, 2005-08
                                • Figure 8: Trends in GDP, PDI and consumer expenditure, 2003-13
                              • Population dynamics
                                • Figure 9: Implications of changing demographics of the UK population, 2008-13
                            • Strengths and Weaknesses in the Market

                              • Competitive Context

                                • Key points
                                  • Retailer brands progress across Europe
                                    • Figure 10: Value of European own-label markets, by country, 2006
                                  • Threat of discounters
                                    • Innovation
                                      • US retailer brand share static
                                        • Figure 11: Total US sales vs own-label sales in nine key categories, 2002-07
                                    • Who’s Innovating?

                                      • Key points
                                        • Innovation in own-label remains strong
                                          • Figure 12: Share of new products launched, branded vs own-label, 2003-08
                                        • M&S leads the way
                                          • Figure 13: Percentage share of new food launches, by retailer, January-October 2008
                                        • Categories where own-label is the strongest
                                          • Figure 14: Top five food categories for own-label innovation, 2003-08
                                        • Focus on two sectors
                                          • Figure 15: Share of NPD in cakes, by company, January-October 2008
                                        • Cakes
                                          • Cooking sauces
                                            • Premium positioning
                                              • Imitation – sincerest form of flattery
                                              • Branded vs Own-label

                                                • Key points
                                                  • Branded/own-label penetration ratio
                                                    • Strongly branded categories
                                                      • Figure 16: Products with strong brand penetration, 2008
                                                      • Figure 17: Strongly branded categories with a single dominant manufacturer, 2008
                                                      • Figure 18: Strongly branded categories with major competing manufacturers, 2008
                                                    • Own-label-dominant categories
                                                      • Figure 19: Products with strong own-label penetration, 2008
                                                      • Figure 20: Own-label-dominant categories, 2008
                                                    • Intermediate categories
                                                      • Figure 21: Intermediate product categories, 2008
                                                      • Figure 22: Intermediate categories, 2008
                                                    • Shift to own-label is accelerating
                                                    • Retailers Push Own-label

                                                      • Key points
                                                        • Retailers broaden ranges
                                                            • Figure 23: Own-label ranges, 2009
                                                          • Recent retailer initiatives
                                                            • Tesco
                                                              • Sainsbury’s
                                                                • Asda
                                                                  • Morrisons
                                                                    • Waitrose
                                                                      • Marks & Spencer
                                                                        • Own-label strategy – the future
                                                                        • Manufacturer Strategies

                                                                          • Key points
                                                                            • Brand strategy
                                                                              • Figure 24: Core elements of brand strategy
                                                                            • Brand stretching
                                                                            • Brand Communication and Promotion

                                                                              • Key points
                                                                                • Supermarkets invest more in adspend
                                                                                  • Figure 25: Main monitored media advertising expenditure on food, 2004-08*
                                                                                  • Figure 26: Top ten advertisers on food, 2007 and 2008
                                                                                  • Figure 27: Advertising expenditure on food, by retailer, 2004-08
                                                                                • Sainsbury’s outspends Tesco
                                                                                  • ‘Reassurance’ campaign to fight back
                                                                                  • The Consumer – Attitudes towards Brands and Own-label

                                                                                    • Key points
                                                                                      • Own-label on a par with brands: lifestage divides
                                                                                          • Figure 28: Attitudes towards supermarket own-label and manufacturer brands, November 2008
                                                                                          • Figure 29: Appreciation of own-label vs brands (overall perception and taste), by lifestage, November 2008
                                                                                        • Taste and quality, two attributes that could raise own-label profile
                                                                                          • Price influences purchase
                                                                                            • Brand loyalty has its limitations
                                                                                              • Figure 30: Agreement with statements on brands, by socio-economic group, November 2008
                                                                                          • The Consumer – Preferences for Manufacturer Brands

                                                                                            • Key points
                                                                                              • Key successes for Heinz during recession
                                                                                                  • Figure 31: Food and drink categories where consumers would only buy manufacturer brands, November 2008
                                                                                                • Cereals and snacks have wide variety
                                                                                                  • Dominant brand categories
                                                                                                    • Brand-loyal consumers
                                                                                                      • Figure 32: Food and drink categories where main shoppers would only buy manufacturer brands, November 2008
                                                                                                      • Figure 33: Consumers who buy five or more manufacturer brands, by age, socio-economic group and presence of children, November 2008
                                                                                                  • The Consumer – Target Groups

                                                                                                    • Key points
                                                                                                      • Brand endorsers are a minority
                                                                                                          • Figure 34: Target groups based on attitudes towards own-label and manufacturer brands, November 2008
                                                                                                        • Own-label Enthusiasts (21% of respondents)
                                                                                                          • Own-label Satisfied (36% of respondents)
                                                                                                            • Brand Endorsers (25% of respondents)
                                                                                                            • Appendix

                                                                                                              • Abbreviations
                                                                                                              • Appendix – Internal Market Environment

                                                                                                                  • Figure 35: Agreement with selected lifestyle statements on brands, by demographics, 2008
                                                                                                                  • Figure 36: Agreement with selected lifestyle statements, by demographics, 2008
                                                                                                              • Appendix – Broader Market Environment

                                                                                                                  • Figure 37: Trends and projections in UK household size, 2003-13
                                                                                                                  • Figure 38: Trends and projections in UK population, by age, 2003-13
                                                                                                                  • Figure 39: Trends and projections in UK population, by socio-economic group, 2003-13
                                                                                                              • Appendix – Branded versus Own-label

                                                                                                                  • Figure 40: Consumption of branded vs own-label in selected food and drink categories, 2006 and 2008
                                                                                                              • Appendix: The Consumer – Attitudes towards Brands and Own-label

                                                                                                                  • Figure 41: Attitudes towards own-label and manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 42: Attitudes towards own-label and manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 43: Attitudes towards own-label and manufacturer brands, by demographics, November 2008
                                                                                                              • Appendix: The Consumer – Preferences for Manufacturer Brands

                                                                                                                  • Figure 44: Food and drink categories where consumers would only buy manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 45: Food and drink categories where consumers would only buy manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 46: Food and drink categories where consumers would only buy manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 47: Food and drink categories where consumers would only buy manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 48: Food and drink categories where maiin shoppers would only buy manufacturer brands, by demographics, November 2008
                                                                                                              • Appendix – The Consumer: Target Groups

                                                                                                                  • Figure 49: Target groups based on attitudes towards own-label and manufacturer brands, November 2008
                                                                                                                  • Figure 50: Target groups based on attitudes towards own-label and manufacturer brands, by demographics, November 2008
                                                                                                                  • Figure 51: Target groups, by food and drink categories where main shoppers would only buy manufacturer brands, November 2008
                                                                                                                  • Figure 52: Target groups, by number of food and drink categories where main shoppers would only buy manufacturer brands, November 2008

                                                                                                              Companies Covered

                                                                                                              • Aldi Stores Ltd (UK & Ireland)
                                                                                                              • Alpro NV
                                                                                                              • Arla Foods amba
                                                                                                              • Asda Group Ltd
                                                                                                              • Baxters Food Group [Baxters of Speyside]
                                                                                                              • Bighams Ltd
                                                                                                              • Birds Eye Foods
                                                                                                              • British Bakeries Ltd
                                                                                                              • British Market Research Bureau (BMRB)
                                                                                                              • Burton's Biscuit Company
                                                                                                              • Cadbury Trebor Bassett
                                                                                                              • Campbell Soup Company
                                                                                                              • Carbon Trust
                                                                                                              • Clipper Teas
                                                                                                              • Co-operative Group
                                                                                                              • Coca-Cola GB
                                                                                                              • Dairy Crest Group plc
                                                                                                              • Danone UK Ltd
                                                                                                              • Dr Oetker
                                                                                                              • Frank Roberts & Sons
                                                                                                              • Government Actuary's Department (GAD)
                                                                                                              • Green & Black's Ltd
                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                              • HJ Heinz Company UK
                                                                                                              • ITV plc
                                                                                                              • J. Sainsbury
                                                                                                              • Jamie Oliver
                                                                                                              • Kellogg Company of GB Limited
                                                                                                              • Kettle Foods Ltd
                                                                                                              • Kraft Foods UK
                                                                                                              • Lidl (UK)
                                                                                                              • Marks & Spencer
                                                                                                              • Mars Incorporated
                                                                                                              • Masterfoods UK
                                                                                                              • McCain Foods Limited
                                                                                                              • Muller Dairy UK Ltd
                                                                                                              • Napolina
                                                                                                              • Nestlé UK Ltd
                                                                                                              • New Covent Garden Food Co
                                                                                                              • Northern Foods Plc
                                                                                                              • Office for National Statistics
                                                                                                              • Onken Dairy
                                                                                                              • Patak's Foods Limited
                                                                                                              • PizzaExpress Limited
                                                                                                              • Premier Foods plc
                                                                                                              • Private Label Manufacturers Association (PLMA)
                                                                                                              • R Twining and Company Limited
                                                                                                              • Ryvita Company Ltd (The)
                                                                                                              • Safeway Stores
                                                                                                              • Tesco Plc
                                                                                                              • Tetley Group
                                                                                                              • The Fabulous Bakin’ Boys
                                                                                                              • The Fairtrade Foundation
                                                                                                              • The Kroger Co.
                                                                                                              • The Schwan Food Company
                                                                                                              • Unilever Bestfoods UK Ltd
                                                                                                              • United Biscuits
                                                                                                              • Waitrose
                                                                                                              • Wal-Mart Stores, Inc
                                                                                                              • Walkers Snack Foods Limited
                                                                                                              • Warburtons
                                                                                                              • Weetabix Ltd.
                                                                                                              • Weight Watchers Ltd. (UK)
                                                                                                              • Wm Morrison Supermarkets
                                                                                                              • Woolworths Group plc
                                                                                                              • Wyke Farms Limited
                                                                                                              • Yeo Valley Farms (Production) Ltd
                                                                                                              • Young's Bluecrest Seafood Ltd

                                                                                                              Brands - Are Supermarkets Squeezing Out Brands? - UK - February 2009

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