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KN52121 KEY NOTE OWN BRANDS MARCH 2001

ISBN 1-84168-020-6

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This report covers: own brand, grocery, cosmetics, toiletries, OTC medicine, household chemicals, DIY, clothing, footwear,

Companies covered include: Aldi Stores, ASDA Group, Wal-Mart Stores, budgens, Iceland group, Lidl, Wm Morrison, Netto Foodstores, Safeway, J Sainsbury, Tesco, Somerfield, Waitrose, Arcadia Group, The Boots Company, Marks & Spencer, Superdrug Stores, B&Q, Kingfisher, Castorama, Homebase, Coats Viyella, Express Dairies, Hillsdown holdings, McBride, Northern Foods, Perkins Foods, Peter Black Footwear & Accessories, Robert Wiseman Dairies, WT Foods,

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Executive Summary
Table of Contents
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EXECUTIVE SUMMARY

The UK market for own brands was worth an estimated £57.4bn in 2000. Sales have increased annually since 1996, by a total of 18.6 percent. In addition to the growth in retail sales overall, the number of own-brand ranges has been increasing, as the over-the-counter (OTC) medicines, clothing and footwear, DIY products and electrical appliances have expanded into this market, alongside food, beverages and other grocery products.

The market remains dominated by grocery products, with own-brand food and beverages well established in all the major grocery multiples. Nethertheless, own branding is strong in clothing, through retailers such as Next and Marks and Spencer's, and has been steadily gaining strength in sectors such as cosmetics and toiletries, DIY and medicines.

The majority of companies retailing own brands are UK based. They include the major grocery multiples, the leading own-brand non-food retailers such as Boots and Superdrug, and the DIY chains such as Homebase and B&Q. There are some notable foreign entrants in the market, including Aldi, Netto and Lidl - the European discount grocery multiples.

The strong economic situation in the UK has caused a shift in the position of the market. Own brands are no longer seen mainly as low-end product ranges, and there is a growing number of premium own brands which are targeted at upper-mass-market consumers. However, retailers of own brand clothing have been affected adversely by the success of retailers such as Matalan, which specialise in discounting branded goods.

Own brand will remain a strong component of the UK retail scene. If the economy remains strong, own labels will continue to be developed as premium ranges. However, if decline occurs, they can easily revert to their former position as value-for-money products, often serving as loss leaders for the major multiples.

TABLE OF CONTENTS

1. Market Definition	2
REPORT COVERAGE	2
MARKET SECTORS	3
Grocery	3
Cosmetics and Toiletries	3
Over-the-Counter Medicines	3
Household Chemicals, Paper Products and Kitchen Aids	4
DIY	4
Clothing and Footwear	4
MARKET TRENDS	4
Brands and the Supermarkets	4
The Organic Threat	5
The Revival of the Own Brands Dairy Sector	6
Convenience Foods	7
MARKET POSITION	7
Table 1: Own Brands as a percentage of Total Retail Sales (£bn), 1996-2000	8
KEY TRADE ASSOCIATION	8
Private Label Manufacturers’ Association International Council	8
2. Market Size	10
THE TOTAL MARKET	10
Table 2: UK Sales of Own-Brand Products(£bn at rsp), 1996-2000	10
GROCERY	11
Dairy	11
Drinks	12
HOUSEHOLD CHEMICALS, PAPER PRODUCTS AND KITCHEN AIDS	12
OVER-THE-COUNTER MEDICINES	12
COSMETICS AND TOILETRIES	13
CLOTHING	13
3. Industry Background	14
INTRODUCTION	14
Recent History	14
Number of Companies	15
REGIONAL VARIATIONS	15
IN THE MARKETPLACE	15
DISTRIBUTION	16
HOW ROBUST IS THE MARKET?	16
4. Competitor Analysis	17
THE MARKETPLACE	17
MARKET LEADERS	17
Own Brand Grocery Retailers	17
Aldi Stores Ltd	17
ASDA Group Ltd	18
Budgens PLC	19
Iceland Group PLC	19
Lidl Ltd	20
Wm Morrison Supermarkets PLC	21
Netto Foodstores Ltd	21
Safeway PLC	22
J Sainsbury PLC	23
Tesco PLC	25
Somerfield PLC	26
Waitrose Ltd	27
Own-Brand Non-Grocery Retailers	28
Arcadia Group PLC	28
The Boots Company PLC	28
Marks & Spencer PLC	29
Superdrug Stores PLC	30
Own-Brand DIY Retailers	31
B&Q PLC	31
Homebase Ltd	31
OUTSIDE SUPPLIERS	32
Coats Viyella PLC	32
Express Dairies PLC	32
Hillsdown Holdings Ltd	32
McBride PLC	33
Northern Foods PLC	33
Perkins Foods PLC	33
Peter Black Footwear & Accessories Ltd	34
Robert Wiseman Dairies PLC	34
WT Foods PLC	34
ADVERTISING AND PROMOTION	35
Table 3: Main Media Advertising Expenditure by Leading Supermarkets and Superstores (£000),Year Ending December 1999 and 2000	35
5. Strengths, Weaknesses, Opportunities and Threats	36
STRENGTHS	36
WEAKNESSES	36
OPPORTUNITIES	37
THREATS	37
6. Buying Behaviour	38
CONSUMER PREFERENCES FOR SUPERMARKET RETAILERS	38
SHOPPING PATTERNS	38
Frequency	38
Table 4: Purchasing Patterns of Grocery Shopping (000 and percent of adults), 2000	39
Days of the Week	39
Table 5: Purchasing Patterns of Grocery Shopping by Preferred Day (000 and percent of adults), 2000	40
Distance Travelled	40
Table 6: Distance Travelled by Consumers to Regular Grocery Purchasing Point (000 and percent of adults), 2000	40
Form of Transport	41
Table 7: Form of Transport Used to Travel to RegularGrocery Purchasing Point (000 and percent of adults), 2000	41
7. Current Issues	42
POSSIBLE SLOW-DOWN in own-brand growth	42
OWN BRANDS IN THE CASH AND CARRY SECTOR	42
NEW LIFESTYLES DRIVE SALES OF PRIVATE LABEL	43
Value Consciousness	43
Snacking	43
The Relationship Between Private Label and Healthy Lifestyles	44
Provenance	44
Alternative Beverages	44
Fast Food	45
8. The Global Market	46
OWN BRANDs AND SUPERMARKET STRATEGIES IN EUROPE	46
The Third-Generation Private Label	46
The Exclusive Label	47
Perishable Goods	47
MAJOR OPPORTUNITIES FOR PRIVATE-LABEL FOODS IN FRANCE	48
Market Developments	48
Environmental Influences	49
Market Sectors	49
Own-Brand Food Trends	49
OWN BRANDS DRIVE INDUSTRY GROWTH IN THE US	50
Table 8: Forecast Growth in Sales of Private-Label Foodsand Beverages in the US ($bn), 2000-2004	50
The Role of Consolidation	51
Expanding the Own-Brand Concept	51
Attractive Margins	51
STORE BRAND DEVELOPMENT IN THE US	52
Consumer Perception of Store Brands	52
Advantages for the Customer	52
Advantages for the Retailer	52
Store Brand Expansion	52
OWN BRANDS IN THE US FOOD SECTOR — A STORY OF MAJORGROWTH	53
POOR SALES IN AUSTRALIA REFLECT BAD MARKETING	54
PRIVATE LABEL FAILS TO TAKE OFF IN ASIA	55
Hindrances to Growth	55
A Positive Outlook	56
9. Forecasts	57
INTRODUCTION	57
FORECASTS 2001 TO 2005	57
Table 9: Forecast UK Sales of Own-Brand Products (£bn at rsp), 2001-2005	57
FUTURE TRENDS	58
Diversification	58
Lifestyle Influences	58
Domestic Own Brands Will Continue to Dominate	58
E-Commerce Developments	59
The Changing Status	59
of Own Brands	59
Imitators or Innovators?	59
10. Company Profiles	60
ASDA GROUP LTD	61
THE BOOTS COMPANY PLC	63
ICELAND GROUP PLC	65
MARKS & SPENCER PLC	67
MCBRIDE PLC	69
NORTHERN FOODS PLC	71
SAFEWAY PLC	73
J SAINSBURY PLC	75
SOMERFIELD PLC	77
TESCO PLC	79
WAITROSE LTD	81
11. Further Sources	83
Associations	83
Periodicals	84
Directories	85
General Sources	86
Bonnier Information Sources	87
Government Publications	88
Other Sources	88
Understanding TGI Data	90
Number, Profile, Penetration	90
Social Grade	91
Standard Region	91
Key Note Research	92
The Key Note Range of Reports	93

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Last updated by Jacob van Eldik 22th May 2001