Exceptional challenges in Europe
Brands have experienced some tough times in Europe during the past two years. The war in the Ukraine fueled insecurity and inflation, with soaring prices leading to a cost-of-living-crisis for many consumers. Though households still spend 1091 Euros per year on brands – a 6% increase compared to the previous year –, private labels (PL) have been scoring record levels. In Europe, PL share reached a high of 42% in 2023. What started as a budget decision for a majority of shoppers, has turned into a new habit. These turns to PL are part and parcel of periods of downturn, but the depth of the recent cost-of-living-crisis magnified the shift. As a result, total brand CRP* in Europe dropped from 77 billion in 2021 to 71 billion last year.
Nonetheless, as the latest Brand Footprint rankings show, many brands still weathered the “European storm” and managed to thrive, beating the competition – be it branded or not. This again underlines our mantra: shopper recruitment pays off – proven by the showcases in this whitepaper.
Whereas the ratio of brands declining and those winning in CRP on a global level evens out, it is slightly less favorable in Europe, where 56% of brands are on a decline, against 44% that are growing. Interesting aspect: from market to market, 47% of small brands – with a penetration up to 10% – achieve CRP growth, versus only 35% among big brands. A closer look at value growth – heavily prompted by soaring inflation - paints a more positive picture with only 38% of brands declining and 62% growing.
*Top 250 brands per country
Not only were shoppers less loyal to brands, they were also less loyal to their main or preferred retailer in order to alleviate their budget squeeze. After fast one-stop-shopping during the pandemic, we saw a huge uplift in shopping around: approximately 900 million extra trips in 2023 as consumers were forced to shop around for the best bargains. The big winner of the cost-of-living-crisis was discount with an increase of 6% in number of trips and +13% in value growth (vs. 2022). A shift in retailers and respective habits typically means, that the opportunities of being bought the next time as a (big) brand are cut in half*. The fact that half of all categories lost volume compared to pre-COVID, and three quarters lost volume compared to the year before** did not increase chances of ending up in the basket either.
Source: *Europanel BG 20 meta-analyis / **Europanel barometer
As inflation is weakening across Europe, many shoppers feel less under pressure and we already observed this tipping point in several dimensions at the end of 2023.
Now, nearly halfway through 2024, we are seeing a further decline in coping strategies: Notably, shoppers are reducing their efforts to keep their total basket amount low, also checking prices to a lesser extent. More good news, in particular for brands: less inclination to switch from premium to cheaper brands, or to totally avoid certain brands.
We also see a trend for less “retailer hopping”, and exploring preferences with regards to the main grocery retailer speaks in favour of supermarkets. In 2022, 28% of shoppers planned to shop more at hard discount, today this number is down to 20%. Also, online is slowly finding its way back into the channel mix. Leaving pure rationale behind, consumers plan to treat themselves more often, though still rather at home than with out-of-home activities.
Budget still plays a major role and 93% of European shoppers state that budget management is part of their life. But other aspects are moving into focus again: personal health – mental and physical – and sustainability, especially aspects of climate change and waste & pollution.
While brands have lost ground in Europe, we were able to report a bit of relaxation already at the end of 2023: Compared to early 2022, when 37% of households in Europe were struggling financially, this percentage has now decreased to 34%. As shoppers’ financial worries decrease, there is a window of opportunity to regain trust and win shoppers back from PL.
Admittedly, shoppers’ preferences still lean towards the rational side and for 63% price rules over quality. But most recent results from our latest Behavior Change report show that the share of shoppers preferring brands (48%) is nearly on a par with those opting for PL (52%) – the most positive ratio since the start of inflation. While brands still need to work hard to re-gain shoppers, they still enjoy more trust to build on: If prices were identical, the majority of shoppers would choose brands, as they feel brands offer better quality (11% more than PL) and more innovation (12% more than PL).
The Flower Farm offers 100% plant-based spread for baking, frying and spreading, without preservatives and with only natural ingredients. Palm-oil free is the simple, yet strong message that clearly communicates the one contribution that shoppers are making, also boldly stated on the packaging. The Flower Farm is especially popular among younger buyers, achieving a higher than average spend per buyer. The Dutch company is an excellent example for a successful brand with one mission: Offering products that are palm-oil free, thus trying to stop deforestation for palm-oil plantations – a clear sustainability message and mission for the future.
Source: CPS GfK | Brand Footprint 2024 Dutch FMCG Ranking; theflowerfarm.world
