Store Branded Beverages a Big Threat to National Soft Drink Makers

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November 19, 2009

Store brands in the total soft drinks sector now account for more than one in every 10 liters traded in the global marketplace, which rises even further if you discount the on-premise sector, where private label use is marginal, according to research from Canadean, a U.K.-based beverage research and consulting company.

“The rise of private label is proving to be a considerable threat to branded soft drinks,” Canadean said in its report titled, “Private Label Trends in the Global Soft Drinks Market.”

Apart from the fact that consumers are more inclined to seek out the value that private label products represent in a soft economy, the shift from on-premise to off-premise sales has also boosted the private label segment.

“In many markets the footfall in bars and restaurants has fallen back sharply but consumers are compensating for this by drinking more at home and buying soft drinks in the off-premise, where the bulk of private label products are found,” according to the report.

B-brand operators are particularly vulnerable to the expansion of private label, “but A-brands are also losing out, as the quality of private label offerings improves and private label products take up a wider range of price positioning to now incorporate value, discount, mainstream and premium price positions,” according to the report.

In addition to grocery stores, drug stores and wholesale club stores, the report cited convenience stores and fast-food establishments as venues where store brand beverages are growing.

In terms of category vulnerability, “ juice in particular has proved more susceptible than other categories because it is a relatively mature category. Consequently private label products make up nearly a quarter of all juice volumes,” the researchers said.

The report goes on to strongly recommend that national branded players develop defensive strategies to better differentiating from private label rivals and justifying the price gap based on their equity.

“Private label products will continue to make headway, but brands can be reassured that private label will always struggle to compete with brand heritage and ultimately consumers want retailers to provide them with the choice that brands provide,” the researchers said.

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