A question of trust

December 2010

“The brand is one of the few stable elements in an ever-changing world.” This statement by French brand expert Jean-Noel Kapferer has been the guiding principle for the marketing teams of companies for many years. Brands convey quality and reliability, as well as a positive image and prestige, to the consumer. However, as you would expect, they are more expensive than the unbranded products on the adjacent shelf as a result. Food retailers have been able to counter this with their own retail brands. Although these brands were able to record virtually continuous growth in market shares across Europe a few years ago, their growth has recently stagnated in some countries. However, even now retail brands continue to stay ahead in some segments, provided that consumers trust the quality of the products.

Has the retail brand reached its limit? This seems to be the case in some European countries at least. A certain level of saturation seems to be evident in the UK and Germany in particular, while the Netherlands, Spain and France are still experiencing a slight increase in the share of retail brands. A different picture emerges in Poland, a country where retail brands have a significantly lower share of the market. The comparatively new “own brands” are still on a clear upward trend here: while they had a market share of just 16% in 2006, this increased to almost 20% last year – and the rise is set to continue.

With a retail brand market share of almost 37%, Germany is well above the European average. But a look at the individual areas shows that there are product segments which are cashing in to an above-average extent.

One example is paper products. Consumers requiring tissues, kitchen roll and toilet paper in Germany are particularly likely to come across the retailer’s own brand products on the shelves. In the first half of 2010, the share of these retail brands stood at an impressive 66%, which puts paper products in first place in the rankings. In the same period, retail brands accounted for more than half of conserves and dairy products. Retail brands are also in a strong position for pet supplies, frozen foods and fats and oils – while the overall share of own brands in the consumer goods sector stands at just under 37%, these product groups all have shares of over 40%. These are the latest findings of GfK Panel Services based on the Consumer Scan panel, which comprises 30,000 respondents.

The mid-range of the rankings is particularly highly populated with food items, such as delicatessen products, hot drinks and confectionery, as well as washing and cleaning agents. The latter record a share of around one third. Consumers appear to be more selective with regard to alcohol, body care and healthcare products. Retail brands from these product groups have lower market shares and appear further down in the rankings. When it comes to their children, Germans seem to trust the more renowned brands: the share of own brand labels for baby food only totals 5.8%.

Limiting the risks

It appears that trust is a decisive factor in the selection of retail brands. How high is the risk associated with making the wrong decision for a purchase? Does the product fulfill my expectations and requirements? These are questions that consumers consider when browsing the supermarket shelves. Subjectively, Germans perceive the risk of making a wrong purchase very differently depending on the product group, and consequently the share of the market held by retail brands also varies. Relatively few consumers are worried about buying retail brand products for household items, such as aluminum foil, tissues and tinned vegetables, but body care products are a different matter. Around 80% of those buying toothpaste, shampoo and face cream want to avoid making a bad purchase and almost three in four consumers attach importance to choosing the right product for hand creams. Germans also consider it important that the wrong brand of shower gel does not land in their shopping baskets. This caution on behalf of consumers is reflected in the market share of retail brands: with the exception of hand creams, this does not exceed 20% for body care products.

A different picture emerges for food products. Consumers consider the risk to be somewhat lower for pasta, rice, ketchup and margarine. Around 60% of respondents think it is important to avoid making a bad buy here, and the share of retail brands is therefore higher. Consumer caution seems to increase in relation to the level of contact that the product has with the human body. Food products which are not in the fresh food section are the exception. Perhaps consumers think they are more able to judge the quality here than is the case for anti-wrinkle creams or shower gel. The best example of the variation in risk assessment is aluminum foil: it is only touched very briefly and is not eaten, and therefore the perceived risk of making a wrong purchase is lower down on the list of considerations.

In practice, there are four influencing factors which drive consumers’ risk perception upwards during the brand selection process. The perceived risk increases the greater the importance of the product’s purpose, the greater the level of body contact, the greater the prestige of the product group and the more difficult it is for the consumer to establish the quality for themselves. Manufacturers can use these influencing factors to their advantage, by emphasizing the risk potential of a bad buy in their communications. On the other hand, it is the role of those responsible for marketing retail brands to meet consumers’ need for assurance through quality awards, such as “Stiftung Warentest”.

The future of retail brands in Germany

It remains to be seen what the future will hold for retail brands. As a result of the upswing, consumer sentiment is noticeably higher and, according to the latest GfK Consumer Climate, consumers believe that they will soon have a little more money available. Will they invest these extra funds in expensive premium products? The top segment is not the only potential source of pressure. Mid-range brands, which lie between retail brands and manufacturer brands, are often regionally rooted and have a long tradition, were able to record increases again for the first time last year, despite, or perhaps as a result of, the crisis. These mid-range brands represent proximity, quality and certainty – values that have increased in importance in uncertain times. If the retail brands want to affirm their position in the face of competitors, there is one thing that must happen above all else: these brands have to expand and not rely solely on consumers’ price consciousness. If retail brands are successful in gaining further consumer trust through concepts of added value, they have good prospects of affirming or even strengthening their position in some segments.

Data source: GfK Panel Services (2010)
For enquiries please contact Wolfgang Twardawa or Claudia Gaspar.

For all other enquiries on Compact contact Claudia Gaspar, e-mail: hello@nim.org.