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Private label brands to offer premium consumer compromise

By Neil Merrett , 26-Jun-2008

Private label food and drink brands will continue to grow as cash-strapped consumers' increasingly perceive the products as value for money, according to Datamonitor.

The industry analyst told BeverageDaily.com that while consumers were unlikely to completely drop their demand for luxury brands, a growing focus on value for money could provide new opportunities for manufacturers.

 

 

 

The comments follow last week's announcement by Cott, a US-based manufacturer of private label beverages, to refocus on the own-brand market.

 

 

Private label goods

 

 

 

Following a 60-day evaluation of its business operations, the company said it had decided to cut a number of executive operations across its operations as part of a shake-up focused on new private label brands and flavours. The company also said that it was looking to cut its costs.

 

 

 

Private label goods - or own-brand products as they are also known - are made by a company to be sold under another group's brands, usually in the case of retailers.

 

 

 

They tend to be seen by consumers as cheaper alternatives to leading branded food and beverage products.

 

 

 

Economic trends

 

 

Datamonitor analysts Katherine Collins and Richard Parker said that Cott's strategy of reaffirming its presence in the private label market could prove to be prudent as the segment should prove more immune to the current economic downturn.

 

 

 

The analysts claim that in the current beverage market, higher profile, quality-focused private label brands were increasingly likely to prosper as consumers begin to reassess their views of own-brand goods.

 

 

"Firstly, they may look to maintain their preferred branded choices, but are not afraid to shop around to get the best deals," they stated. "At the next stage, private label has become a serious contender as consumers no longer see own-brand premium ranges as inferior."

 

 

The company cited Tesco's Finest range or Sainsbury's Taste the Difference as examples of private label brands that try and play up their luxury to court new additional consumer interest.

 

 

 

By contrast, the analysts claimed that growth in the market for premium products would remain exclusively within its core customer-base.

 

 

"The market may slow due to mainstream consumers freezing or reversing any propensity to trade up to branded premium products," they stated. "However, they may still trade up to private label premium items based on the price advantages they still offer."

 

 

Cott strategy

 

 

Cott chief executive officer David Gibbons claimed that the company had spent too much resources on branded goods production over the last 18 months and needed to reverse the trend.

 

 

"We will change course," he stated. "Through these efforts we will continue to reposition Cott to play a greater role as a champion of private label."

 

 

 

By eliminating unspecified positions across its operations, the company says it hopes to cut its current costs by over 10 percent, to more quickly react to changing market trends for flavours, and packaging types across it operations.

 

 

 

"Our role is not to invent new categories," Gibbons stated. "[It] is to be 'fast followers' to leverage the growth of expanding categories and to improve profitability for our retail partners at lower prices to consumers."

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