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12° Nicosia,
15 July, 2024
 
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Supermarkets bet on their own private labeled products

Inflation is driving up sales of private label products compared to branded products

Maria Eracleous

Maria Eracleous

Consumers are turning to private label and exclusive import products to combat inflationary pressures on consumer goods in supermarkets. This trend can be seen both at the European level (around 35% average share in supermarkets, according to Statista) and in Greece, where measurable results can be found. For the period January-October 2022, the share of private label products is 16.1%, with a gradual increase in market share recorded each year. Although official statistics are unavailable, there is an upward trend in Cyprus.

There are, however, estimates expressed to "K" by people familiar with data in the food retail sector, as well as supermarket movements that almost entirely offer the consumer the choice of private label products. This is a term that first appeared in the Cypriot market around 2009, with the introduction of the Lidl supermarket chain, which offers a variety of products, the majority of which are private labels. As other large and small supermarkets began to put their own labels on products in various categories, competition in this area grew gradually. According to PASYLE's secretary general, Marios Antoniou, "private label was significantly strengthened in 2013, during the economic crisis, and today they are going up even more due to inflation".  "These products are always favored during economic downturns. However, regardless of the crisis, it is a high-quality option that is here to stay." Andreas Hatziadamos, executive secretary of the Association of Hypermarkets, stated that a lot of good work has been done in this area in recent years, with hypermarkets investing more and more in private label products in order to increase their presence in more categories.

The products

But what exactly are private-label goods? They are products made by the supermarket itself, in collaboration with manufacturing industries, either in Cyprus (in this case) or elsewhere. Every supermarket has its own brand. For example, the Alphamega supermarkets, have private label products in most categories, while the Papantoniou chain, has chosen umbrellas such as "Dialect" and "Star". Private label is gaining significant market share in all product categories, though the percentage varies by category. According to Papantoniou Hypermarkets, shares range from 10% to 60%. According to M. Antoniou, the percentages vary by category and depend on consumer loyalty.  Personal hygiene products such as sponges, shower gel, washbasin soap, and toilet paper, as well as water, spices, salt, sugar, flour, biscuits, and pulses, are among the most susceptible categories. For these products, customer brand loyalty is less frequently recorded, making it easier for consumers to switch from brand to brand based on price differences. As a result, these are the products that consumers prefer over private label categories. Coffee and cereal have lower private-label sales rates, and alcoholic beverages have even lower rates because switching to a different brand is more difficult.  However, it should be noted that the quality levels of these products are comparable to those of branded products, with checks conducted using the same quality criteria.

Lower prices

It is a fact that supermarkets are attempting to increase the choices they offer their customers in order to appeal to all wallets as accuracy levels rise. Private label products are less expensive than branded products because they do not include the cost of the middleman, and they provide consumers with a serious choice by maintaining quality levels. According to Antoniou, this also puts indirect pressure on suppliers to keep their prices low, thereby maintaining market balance. It also strengthens the manufacturing industry, as efforts are being made to ensure that the majority of products are manufactured by domestic industries. Aside from private labels, inflation increases sales of exclusive import label products, which are also available at lower prices than well-known mainstream brands.

It should be noted that, in comparison to other European countries, Cyprus has a low share, but it is expected that rates will gradually rise and approach levels seen elsewhere. Supermarkets also play an important role in informing customers about specific products, with additional information available on their websites.

TAGS
Cyprus  |  economy  |  inflation

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