Aggressive pricing helps Spanish brands compete with private label

The Spanish seem to have hit on a way to slow private-label growth: branded manufacturers are adopting aggressive pricing and promotional strategies to stay in the game.

While Spain is recovering from the economic crisis, consumers are still cautious about spending, with thrifty spending on food and beverages becoming an established habit.

Only one-third of Spanish consumers plan to buy more private-label products in the coming year, according to research from Canadean. Instead, they are tending to seek out sales and promotions on branded products.

According to the survey:

• 57% of Spanish consumers look for promotions and discounts
• 49% use vouchers and coupons
• 38% use websites to compare different prices at supermarkets

Brands are positioning their goods around affordability and are increasing the number of reductions and sales.

“As a consequence, both private and branded manufacturers will suffer due to aggressive discounting. This will not just erode premium credentials of brands, but also mean that consumers focus too much on price and promotion and do not evaluate other product attributes such as health and convenience,” said Raquel Perez-Lopez, Canadean analyst.

Established brands still have the edge over private-label products when priced similarly, as consumers believe branded products offer better quality.

“Private-label manufacturers should promote the quality of their goods via clear labelling that states the origin of the product along with the production method. This will encourage consumers to think twice about what product to buy,” said Perez-Lopez.

“Unbranded food and drink products need to stand out on the shelf in order to compete with branded products.”