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Private labels competing for market share in South African retail

Mar 1st 2012, 08:09

01 March 2012

Private labels competing for market share in South African retail

Private labels are taking on a new role in retail, positioning themselves as higher quality products on supermarket shelves, rather than the “low quality’ option they were initially perceived to be.

While most retailers, globally, offer a Good, Better and Best range within their private label bouquet, there is a greater focus on developing premium ranges, which presents a wider scope for improved margins.

Private labels are becoming more dominant in South Africa, as retailers develop strategies to improve profit margins, manage supply chains more efficiently and compete for market share.

Our big food retailers are creating their own private labels with a subtle persistence and these ranges are present across multiple categories on shelf. If one scans a shelf quickly, it can be difficult to distinguish a retailer’s private label from its branded counterpart.

The Food Lover’s Market refreshed store-format, seen in its new store in Tokai, Cape Town, currently offers consumers a choice of approximately 3000 SKUs on its grocery lines, excluding its in-store production. In time to come the retailer envisions that its private label, Freshers, will dominate 40% - 50% of shelf space in this store.

Consumers can rest assured that the Freshers brand will position itself to be as good or if not better than the brands it replaces. Any reduction in price would be as a result of improved efficiency rather than a sacrifice in quality. It’s an exciting prospect for the retailer as it plans to open at least 12 new stores in South Africa and seven new stores in Africa in 2012.

Woolworths, South Africa’s private label leader, recently announced the opening of Woolworths’ Supermarkets, this year. These new format stores will inevitably extend its private label offering and lead to an increase in volume with the desired effect being to improve its margins.

These bigger format stores will offer more product categories, including stationery and homeware, forming part of its private label no doubt, and will allow consumers to complete their entire shop at Woolworths.

The opening of new stores combined with a strong focus on food and new categories sees private labels competing with branded goods on a much larger scale in South Africa.

We’re likely to see a greater percentage of private labels dominating shelf space, leaving branded consumer goods to fight it out for real estate both on-shelf and in-store.

Wendy Smith and Craig Ballantyne

P.S. Look out for this editorial on our editor’s blog.

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