The research firm’s latest report, ‘Private Label Developments in the European Soft Drinks Industry’, highlights private label as a prominent feature of the western European food and drinks market over the past decade.
“The drivers behind this growth remain in place, and we expect private-label soft drinks volume to double over the coming 15 years,” report author Francois Sonneville wrote.
Rabobank predicts a seismic shift within EU soft drinks as so-called B-brand producers (smaller, often local firms that produce less famous brands) begin producing cheaper private label products to maintain capacity utilisation due to market declines, he added.
“Markets that are currently under-developed will have the highest growth rates, but it is more difficult to select the most attractive soft drinks category, as there is no relationship between low private-label penetration and high growth rates.”
Cost leadership or niche strategy
Sonneville said: “In recent years, manufacturers that pursued either a cost leadership or a niche strategy performed well, and will benefit from the future growth.”
But he served-up a stark warning for those companies that lacked such a strategic focus. “Companies without this strategic focus are stuck in the middle and may lose out unless they adapt their strategies.”
The report notes that, since 2000, the market share of private label in Western European food retail has risen from 20-30 per cent, while soft drinks specifically were up from 17-23 per cent.
Sonneville said Rabobank expected continued gains – 35 per cent in the sector by 2025 – to come at the expense of B brands without a clear value proposition, “which will see their competitive position deteriorate”.
“They may even see capacity utilisation come under pressure if the overall market growth is insufficient to offset their loss of market share,” he added.
He added that entering the private label sphere was therefore an “attractive strategy” for B-brand manufacturers looking to improve their business outlook, and told BeverageDaily.com that he though those based in France would be under particular pressure "for a few more years".
Pressure had also begun to build in Poland over the last 12 months, Sonneville added, and said he expected pressure to grow on B brands in Italy over the next 5 years, while Spanish players had already been hit hard over the past decade.
In Turkey Sonneville said that B brands had "little to fear" from private label at the moment, although they were hurting as consumers discovered brands in general.
Meanwhille, in mature markets such as Belgium and the UK where private label was no longer growing, B brands had stabilised at low levels, he added.
Giant, major, niche...
Rabobank identified 3 types of private-label producer: fast-growing acquisitive giants (with turnovers greater than €1bn), major firms with large but declining turnovers (€250m to €750m) and small niche firms with sub-€100m turnovers with more specific products, clients, regions.
The race into private label was a particular threat for firms in the middle, Sonneville wrote: “The major private-label manufacturers are stuck in the middle and many of them risk losing out on growth opportunities in the coming years."
“Their prospects would greatly improve if they adopted the strategy of the giant, striving for economies of scale through acquisitions or mergers.”
But Sonneville told BeverageDaily.com that many 'major' companies were family-owned with a conservative financial structure, where continuity was the principal goal.
"Some investment decisions are being made when possible, rather than when necessary, so these companies deteriorate, but slowly," he said.
"In this environment, it would make more sense to see mergers rather than acquisitions, but only when the situation becomes so desperate that continuity is in danger."