Private labels still selling at substantial discounts versus national brands
Retailers originally established private labels as low-priced alternatives for price-conscious shoppers. Nowadays, private labels in many categories have become very sophisticated often matching top-tier national brands in terms of quality, but also price. We looked at the price development (2013-2016) for national brands versus private labels in 8 countries across many categories.
- Overall, we find that national brands’ price premia dropped in most countries, except Italy, Netherlands and the US.
- In every fourth category, national brands managed to increase price premia by more than 10% but price premia dropped by more than 10% in every third category.
- In many countries personal care categories command the highest price prima followed by beverages and household care (see figure). For example, in Austria national brands charge on average 3 times more in personal care categories than private labels.
- Household care and pet food categories experience the strongest decline of national brands’ price premia.
Overall private labels are slowly closing the price gap against national brands in some categories while in others brands are still enjoying an ability to charge substantially higher prices – for now. Brand manufacturers should be aware that PLs are increasingly adding premium elements to their offerings, thereby shaping consumers’ value perceptions and willingness-to-pay accordingly.