Matthew Stych is the Research Development Manager at Planet Retail. He has spent nine years researching and analysing the retail trends in both developed and emerging markets and offered, for the Natural Beauty Summit Europe 09, his analyse on« Private Label and the Threat to Natural Beauty Brands ».

What is your view on the increasing momentum around private label in the beauty industry? Specifically retailer’s brands?

…in Europe

The momentum behind private label in the beauty industry is being driven by multiple factors. As consumers have reined in their spending on big ticket items during the economic downturn, beauty as a whole has seen a degree of resilience. On the one hand you have beauty products as basic everyday items, and here economy-level private labels simply provide shoppers with a cheaper alternative to brands. At the other end of the scale, premium beauty products allow the shopper to indulge in small luxuries – a temporary respite from the gloom! Similarly, premium private labels allow consumers to continue to indulge, but usually in a more affordable way. On the supply side, many retailers are refocusing their priorities away from network expansion towards improving margins, and private label is one way in which, if handled well, this can be achieved.

… outside of Europe?

Outside of Europe, in markets such as Asia, an additional factor is that retail markets are becoming more concentrated and the presence of international retailers is increasing. Both these factors tend to be strong drivers of private label penetration. We are also seeing retailers in emerging markets taking their private labels beyond the copy-cat and economy-levels into premium and niche markets.

Why do most of the retailers start to launch their own natural or/and organic brands?

Retailers with sufficient private label credibility will look to drive their high-margin premium ranges wherever possible. At the same time, growing consumer interest in the quality and origin of ingredients in beauty products is encouraging them to capitalise on the natural/organic opportunity.

Do you consider this as a threat for the existing other brands?

There is little doubt that private labels are already making inroads into the natural beauty market, especially in countries such as the UK, France and Germany. The spread and growth of private label in general around the world means that the threat looms on the horizon for other markets too. With many retailers currently seeking to cut back on SKUs, while at the same time boosting their private labels, brand manufacturers are going to have to find new ways of heading off the threat from private label, beyond NPD and marketing support. Renewed emphasis on brand values, as well as closer cooperation between brands and the retailers, perhaps in areas such as co-branding, and sharing of category insights, will rise in importance.

Kristel Milet – Blog Editor in Chief