Tough economic climate fuels Private Label soft drinks in 2011
30 August 2012
London - August 30, 2012 - 2011 saw the continuation of the Greek economic crisis, with GDP declining by over 7% by the end of the year. Severe austerity measures were approved on 20 October, despite violent protests against the cutting of public sector wages and tax rises. In September 2011, VAT on non-alcoholic beverages rose from a basic rate of 13% to 23%. This led to a significant boom in the sales of PL products, particularly in the packaged water category.
Overall, Private Label products grew substantially in 2011 and were responsible for almost 11% of total soft drinks sales vs. just over 8% in 2010. All major retail chains noted a significant increase in the sale of PL products, aided by the economic crisis which has prompted consumers who may not have previously considered PL purchase to shift from branded product. Retailers are also attempting to drive sales of their own labels to save costs and cut out the margins taken by producers. The affordability and proven good quality of the products, assisted by heavy promotional activity, has resulted in more consumers shifting to Private Label.
Private Label products also helped to mitigate losses in many soft drinks categories in 2011, thanks to their price advantage compared to branded product. In the nectars category, losses by the branded segment were significantly counterbalanced by the success of PL variants, which have a high share of approaching two-thirds in the category. In the still drinks category, PL brands continued to grow rapidly in 2011, driven by specialty flavors and an increased retailer focus on own brand products.
Despite the success of Private Label products in 2011, all soft drinks categories are projected to decline in 2012, with the exception of energy drinks. Canadean predicts carbonates and juice will see the sharpest declines due to the VAT increase, which will continue to have a negative impact on consumption. Consumers are opting to squeeze their own fruit, which is forecast to result in a double-digit decline in the juice category in 2012.
Still drinks are also expected to record a decline in consumption due to a lack of demand in the deepening economic crisis. PL still drinks are, however, forecast to gain share due to a competitive price strategy.
Private Label is gradually losing its price advantage over branded drinks in some categories, as the retail price of PL products is rising. Retailers have raised the prices of PL brands to offset losses in sales and consumption. This means that consumers are unlikely to retain a sense of brand or, in some cases category loyalty, and will continue to search for the best offers and promotions available, resulting in many well-known brands being offered at lowered prices.
The information in this press release is from our report, "Greece Soft Drinks Market Insights 2012."