The rapid growth of private label products in the retail sector is creating new opportunities but also significant challenges, Spar has warned, adding that increased competition in this booming market could pressure margins and lead to potential oversupply.
The retailer said in its annual report that while private labels were increasingly embraced by cost-conscious consumers, there was a risk that these products may fall short of evolving consumer expectations for quality and lifestyle alignment, prompting retailers to strike a balance between affordability, innovation and premium positioning to meet diverse shopper needs.
“Spar operates mainly as a wholesaler, but our success depends on how well stores perform and how quickly independent retailers adapt to major market trends. These key trends continue to shape the group’s performance in Southern Africa and Europe,” Spar said.
“Increased competition in the private label space could pressure margins and lead to potential oversupply. There is a risk that private label products may not fully meet evolving consumer expectations for quality and lifestyle needs.”
SA’s private label market has seen explosive growth over the years, with sales set to exceed R100bn within the next 6-12 months, according to consumer intelligence group NIQ. Essentials such as bread, cereals and eggs are driving this trend, as economic pressures force many shoppers to prioritise value-based options over traditional branded goods.
In the financial year to end-September, Spar’s private label products grew by 7% in its SA operations, while they contributed more than 21% in the group’s Swiss business.
Rival and JSE peer Shoprite, on the other hand, has been deemed the epitome of this booming market, having added R11bn to its annual sales in the past three years. Shoprite’s private label offerings, including Forage & Feast and Simple Truth, contributed more than R30bn to the supermarket’s sales in 2024.
Despite these gains, the competition is fierce.
Spar warned that retailers were at a crossroads, especially as more players enter the private label space with gaps in product range, packaging or quality threating to alienate consumers. Retailers including Pick n Pay have already encountered such challenges, with their No Name and Crafted Collection ranges underperforming at 11%-12% of total sales.
Spar said it had employed a tiered private label strategy designed to mitigate these risks. Its SaveMor value-focused format targets budget-conscious consumers, while a bespoke high-end private label range aims to attract higher-income shoppers.
The private label boom reflects broader shifts in consumer behaviour. Essentials remain a priority, but demand is growing for niche categories such as plant-based proteins, vegan products and specialised nutrition, according to Spar. Retailers are also adopting strategic pricing models, offering smaller packs for immediate affordability and larger packs for long-term savings.
“Expanding private label offerings into niches like vegan or plant-based proteins and specialised nutrition can attract diverse customer segments. Consumers increasingly prioritise cost-effective food options, boosting demand for value-based private labels. This trend allows for expansion into lifestyle-focused private label products, addressing diverse consumer needs,” Spar said.
Despite economic pressures, optimism is returning to the retail sector. High-income consumer confidence is at its strongest festive season level since 2019, while retail confidence hit a three-year high in late 2024, according to the Bureau for Economic Research.
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