Private label in Italy

Data and facts on a growing sector that reflects constantly evolving consumer habits.
Riccardo Ceredi

A total sales volume approaching 10 billion euros, generating concerted savings estimated at 1.7 billion for consumers compared to brand name products. These are the most salient numbers on the performance of this product type in Italy, according to a report published by Osservatorio Marca (“brand watch”) during the fair of the same name held in January in Bologna.

The consumer perspective: spend less, eat better
The recent growth of private label products is proof that investing in quality pays. Private label grew by 1.7% in 2016, bringing over 1300 different food products into Italian homes.
The development of this category is twofold: on one hand, these products are becoming more widespread, reaching an 18.5% market share. On the other, the quality is also being enhanced. Organic (+9.5%) and premium products (+11.6%) are seeing the highest growth, spurred by growing interest in good eating that respects the environment, while sale of low-end products (the lowest priced brand in each category of the retailer’s offering) have gone down 22.2% in terms of value and 24.5% in volume.
Supermarkets remain the dominant distribution channel, with a 67.3% market share, followed by corner shops (18.1%), while hypermarkets are struggling to gain ground (dropping 0.3% compared to 2015, now with a 15.6% market share).
But what are the sector’s growth drivers? Fresh fruit and vegetables, first and foremost, with growth in both volume (+8.9%) and value (+9.2%) and the largest market value share (31.8%).
Also, 4th range products, which have always favored private label over brand name.
In terms of geography, northwestern and northeastern Italy lead the market, accounting for 18.7% and 20.8% of shares, respectively. But southern Italy has seen significant growth, from 12.6% in 2015 to 13.2% in 2016.
Beyond numbers and percentages, consumer surveys shed light not only on a renewed interest in product quality, but also growing concern for all issues having to do with packaging: from manufacturing processes to the materials used.

The packaging trends: from shelf life to the search for more attractive packaging
The matter of which packaging materials are used and what their properties are falls within the scope of three umbrella topics concerning the private label sector and its relationship to the world of automatic machinery builders.
Firstly, interest in green solutions is driving research on more advanced materials featuring advanced compostability and biodegradability properties, but without skimping on the barrier properties that ensure a longer shelf life.
In the second place, there is growing interest in issues surrounding nutritional facts and traceability, leading to a search for more advanced labels and printing processes.
The rise of state-of-the-art printing technologies is thus affecting packaging itself, influencing graphics, reproduction and greater product visibility on the shelf.
Both these issues are related to the third major trend in the sector: attention to packaging design. Private label is also increasingly feeling the need to have packaging that is both attractive and able to effectively communicate the brand’s message, as well as prioritizing ease of use and easy disposal for the end user.
These points also have to do with an increasingly sophisticated and diverse consumer culture, with consumers expressing increasingly heterogeneous and constantly evolving needs.

Private label as an opportunity for industry
The industry’s other major driver are the manufacturers which see private label as a major growth opportunity. The Italian consumer goods association (IBC) surveyed some of its over 30,000 members on the topic. The results, also presented at the most recent Marca, focused on a sample of 80 operators in the private label market, all of them active primarily in the food, and to a lesser extent, home & personal care sectors, of various sizes and types, but mostly SMEs.
The first striking datum that emerges from the survey is that these concerns have a relatively small market share in the sector in which they operate. 65% of them have less than a 10% share, with just 7 concerns able to cover over 30%.
One of the principal issues investigated was what motivates operators to produce private label goods. The responses showed that reasons include a desire to make the most of production facilities and improving relations with distributors.

Also on the topic of private label, the synergy between manufacturers and distributors is shown to be strategic. For one thing, while it’s true that some respondents operate under a house brand (a strategy adopted partly in order to increase profit margins and partly to gain autonomy from major retailers), this has not troubled their relationship with distributors. Also significant is the finding that over 80% of manufacturers active in the private label sector have been working in the sector for over 10 years, and 43.6% have been in it for more than 20. Private label has thus become an established reservoir of opportunity for Italian manufacturing.