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Whilst Private Label thrives in West Europe, East Europe lags behind

14 October 2013

Over one-quarter of all soft drinks sold in West Europe are Private Label (PL) whilst in East Europe it is only just over one-tenth. Despite outperforming the soft drinks market average, especially since the recent economic downturn, PL products have not been able to gain much market share. Competition between branded products and PL in recent years has intensified as branded players have cut their prices in a bid to maintain market share and thereby narrowing the price differential with PL.

Whilst Private Label thrives in West Europe, East Europe lags behind

In share terms, countries like Hungary, Slovenia, Czech Republic and Poland are the bigger PL players in East Europe. PL products in these countries are performing well in categories where branded products are either new or it is harder to identify or taste the quality difference between brands and PL, for example packaged water. Despite being a dominant beverage category with many branded products and high volumes, carbonates do not have a strong PL performance in these countries. Some East Europe markets, such as Belarus and Bosnia-Herzegovina, where modern retail is still underdeveloped have no or a very low PL presence as yet. As the modern retail concept expands across the region PL can, however, be expected to make further inroads. For instance Romania has seen significant growth in PL in recent years in line with the expansion of modern retail - and especially discount stores, while in Russia PL is benefiting from the increasing shelf space allocation and preferential positioning practiced in most retail networks.

Squash/syrups has the highest share of PL products in East Europe with around a quarter share of volumes. For many consumers PL squash/syrups do not suffer from a low quality image and, as such, are more easily substitutable for branded products especially if there is little brand loyalty. On the other hand though squash/syrups’ fellow dilutable, fruit powders, actually has the lowest share of PL. As fruit powders is already very low cost and even branded products often suffer from a low quality image, there is little incentive for consumers to trade down to PL products and retailers tend to spurn a category which offers very low margins.

As the economic outlook remains bleak across much of the region, PL products are expected to see slower growth in 2013 than in 2012. Consumers remain concerned about spending which in part is helping the growth of PL, but where possible consumers still prefer to opt for branded special offers over a PL product which will put pressure on the latter.

The Canadean report: ‘Quarterly Beverage Tracker Q2, Eastern Europe’ was published in September 2013

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