European private label manufacturers and retailers can expect to be very busy over the next few years, judging by the principal findings of a new multinational survey of more than 1,000 industry executives conducted by PLMA which found that a majority of respondents see good times ahead for both private label and their own companies. “In the survey, there was strong overall agreement on the state of the industry and the prospects that lay ahead. Most importantly, the growth of private labels in Europe will continue over the next five years,” said Peggy Davies, PLMA President. “Given the fact that private label share in Europe is already the highest globally, with 39% of the total grocery market value, the response among the industry professionals offers great optimism for all private label players.”
“Within the context of such positive prospects for private labels in Europe, the five-year outlook for their own companies is also overwhelmingly positive. The vast majority of retailers and manufacturers see a bright future for their businesses. And companies are preparing for the positive sentiment towards private labels. Nearly all have set aspirational private label growth targets for the coming years,” added Davies.
The survey also indicated challenges ahead. In the opinion of private label manufacturers and retailers, the most pertinent problems are operational. For example, issues with raw materials and the supply chain, being able to offer consistent quality, and finding skilled personnel could get in the way of the companies’ expected growth forecast. Declining and greying populations as well as the pandemic have been leading to labor and skills shortages, which are expected to remain a short- and long-term challenge.
Geopolitical unrest and climate change are putting pressure on the supply chain and the consistent quality of raw materials and ingredients. Some of these risks are now managed by retailers by contracting with multiple private-label suppliers for the same products.
While all stakeholders – retailers, consumers, NGOs, private label manufacturers, A-brand manufacturers, the EU, and governments – have moderate to high interest in driving sustainability, most respondents say the main driving force of sustainability is the EU. Regulations set by the EU might create some level playing field for all parties within the Union, but manufacturers say that complying with all the regulations makes it hard for smaller companies to survive for lack of funds or staff.
In another key finding, both retailers and manufacturers see the retailer-private label supplier relationship as having evolved from a transactional, price-oriented relationship into a more strategic one. Today’s complex environmental, sustainable, and societal requirements have led retailers and private label manufacturers to invest in the relationship with each other to build value and profitability.
The PLMA study – titled “European Retailers & Manufacturers Talk About the Future: What will the private label landscape look like over the next five years?” – involved 1,017 respondents from 865 companies across 37 countries. Manufacturers from 34 European countries participated as did retailers from 29 European countries.