Supermarkets raking in private label sales

The private-label supermarket segment has jumped by 85% in the past five years and will make greater inroads with high-income earners in the next few years, says research firm IbisWorld.

In a report, IbisWorld said consumers will spend $21.6 billion on private-label groceries in the 2012-2013 year, out of a total forecast spend of A$85.9 billion. Moves by households to tighten spending amid cost of living concerns, has helped fuel the boom in the private-label market.

Five years ago, the category was picking up only 13.5% of supermarket sales. It will hit 25.2% share in 2012-13, and 33% in 2017-18, says the research firm. Consumers have been flocking to purchase private-label grocery staples such as butter, sugar, bread and milk.

"Dry grocery items and chilled packaged food categories have been the strongest performers for private-label products – although alcohol has also been a strong contender for Woolworths and Coles", IbisWorld general manager Karen Dobie said.

The research firm highlighted chocolate, confectionery, soft drinks, cosmetics and sanitary products as poor performing segments, noting that consumers wanted a trusted, quality brand when purchasing these products.

While private-label products are predominantly bought by low-income families, supermarkets are now targeting high-income earners, who now make up 15% of the market.

"At present, consumers in middle and higher income groups represent the strongest growth opportunities for retailers looking to push private-label products," said Dobie. "Major supermarkets are spending big bucks on activities aimed at blurring the lines between branded products and their own in-house fare.”

Dobie added that the supermarkets are “introducing premium, organic and fair trade products – such as Woolworths' ‘Select' range – to attract private-label buyers from all walks of life.”

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