Sales of private label fast-moving consumer goods (FMCG) are set to exceed R100bn within the next six to 12 months, as shoppers increasingly opt for value, according to a report by consumer intelligence group NIQ.
NIQ’s Retail Measurement Service analysis for the first nine months of 2024 found that the market share of private-label products — typically more affordable than “name” brands — have increased their market share over the past year, largely led by the top five manufacturers.
Zak Haeri, NIQ SA’s MD, said this growth indicates both consumer adaptability and the economic dynamics affecting spending habits.
“Continued focus on consumer preferences and financial strategies will be essential for FMCG retailers and manufacturers to navigate the complexities of the current market,” Haeri said.
In 2023, private labels accounted for more than R89bn, or 24.3%, of total basket value sales, with Shoprite’s range among the biggest contributors. The group’s in-house brands, which include Forage & Feast and Simple Truth, reported sales growth of 12.8% in its financial year to June 30, contributing more than R30bn to its supermarket sales.
The retailer’s emphasis on quality, value, and premium offerings has paid off, directly competing with traditional branded consumer goods companies, NIQ said.
However, Pick n Pay, once a prominent player in this segment with its budget-friendly No Name and premium Crafted Collection, is facing challenges with its private labels hovering at 11% to 12%, far below potential. CEO Sean Summers previously told Business Day the segment has struggled with product range, packaging, and positioning.
Beauty and pharmaceutical giant Clicks announced earlier this year that sales of its private label products grew by 14.3% and now account for 31% of front-shop sales.
Bare necessities
According to the NIQ report, essentials items and promotional offers are strongly influencing spending, while shoppers are also making strategic choices in pack sizes. Many are opting for smaller packs to manage immediate expenses or larger packs to save in the long term, depending on individual financial needs, NIQ said.
Overall, FMCG sales have grown 2.6% year on year, with essentials such as fresh produce and health products experiencing steady demand. NIQ attributes part of this growth to reduced load-shedding, which has supported sales of perishable items.
Essentials continue to be a priority, even above non-essential groceries, as consumers adjust their budgets, NIQ said. Still, the report found that economic sentiments vary, with 42% of consumers surveyed saying they felt financially better off than a year ago. However, 33% of respondents felt worse due to escalating costs, economic stagnation and job concerns.
With Black Friday fast approaching, consumer spending is expected to rise, especially on tech and durable goods such as major appliances, as buyers look for value.
Despite growth in the tech and durables sector throughout 2024, NIQ said major discounts might not be “as deep as” previous years. That's because retailers aim to balance appealing promotions with maintaining healthy profit margins, particularly as new brands — many of them from China — seek to enter the market.
“We expect new brand entrants, especially Chinese disrupters, to use Black Friday as an opportunity to break into new markets,” NIQ said.
“While there are major promotional pushes, we anticipate that overall margins for retailers and manufacturers will be higher than in prior years. Most discounts are not expected to be as deep this year as in some other years. However, there is a golden opportunity for retailers and manufacturers to capture revenue growth.”
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