Shopper Digest: Navigating the Rise of Private Labels

Malaysia, much like the rest of the world, has been grappling with the impacts of inflation, compelling shoppers to be more prudent when it comes to spending money. This shift in consumer behaviour is notably observed in two key trends concerning in-home consumption: a reduction in categories deemed less essential, and a shift towards more economical options within categories that are still relevant to shoppers. 

A notable phenomenon in the FMCG landscape of recent years is the burgeoning growth of Private Labels. Traditionally more prevalent in regions like Central and South, Private Labels have seen a remarkable surge in penetration and buyers across the other regions, with Malay and Low-Income demographics being the primary drivers of this trend.

However, the growth of Private Labels hasn't been uniform across all segments in the FMCG market. While categories like Beverages and Non-Food segments (both the Household and Toiletries sector) witness a substantial increase in Private Label adoption, other segments within the Food category experience more moderate growth.

Several factors contribute to the ascent of Private Labels. In addition to the increased focus and expansion to more categories, and strategic placement within stores (often in proximity to category leaders), which can be observed during store visits — promotion also plays a pivotal role in enhancing the perceived value proposition of Private Label products. 

But what implications does this trend hold for manufacturers?

Firstly, for mass brands targeting Malay and Low-Income consumers or operating within the Beverages or Non-Food categories, it becomes imperative to assess the threat posed by Private Labels. Understanding the dynamics of brand switching and identifying the proportion of shared buyers between your brand and Private Labels within respective categories is even more crucial for devising effective strategies to safeguard market position.

Secondly, the current trajectory suggests a continued momentum for Private Labels, especially considering potential cost pressures stemming from the upcoming subsidy rationalisation. To continue justifying a price premium over more affordable alternatives, brands must understand the top priorities of shoppers when they shop within the category. This understanding will guide brands in developing the most impactful brand marketing and sales strategies.