KAPA REYNOLDS – A Small Business Serving Fast-Moving Consumer Goods

For over 30 years, KAPA has been identifying needs, sourcing and developing products, and ensuring their performance and distribution for the private label brands of its clients. Our function is to create and develop high-performing, safe, and effective products, making them available in stores to the widest audience. Our mission is to provide consumers with products that contribute to their well-being, hygiene, and health.

Today, more than ever, in an anxious environmental context and a challenging economic environment, KAPA REYNOLDS offers innovative solutions that meet the latest needs of fast-moving consumer goods, allowing private label brands to continue supporting households.

Inflation – A Growth That Is Not Really Growth

In this year, persistent inflation compared to the previous year continues to play a predominant role as the main driver of growth in fast-moving consumer goods (FMCG). However, this inflation is not without consequences on consumption habits.

The rise in prices has a significant impact on consumption, with a 2.6% decrease in products purchased by consumers. Additionally, these products are, on average, 0.3% larger, which can be interpreted as an attempt to compensate for the price increase by offering a slightly larger quantity for the same cost.

A notable effect of this situation is the increase in purchases of private label brands (MDD) at the expense of national brands (MN), with a mix effect estimated at -1.5% according to Circana data. Consumers are increasingly opting for retailer-branded products, which often provide a more affordable alternative to national brand products.

This trend highlights how consumers adapt to changing economic realities in times of inflation. They seek more affordable solutions to maintain their purchasing power while trying to mitigate the impact of rising prices. For national brands, this poses a challenge to maintain their market share and requires them to rethink their strategies to meet the changing needs of consumers.

Private Label Brands: A Safe Haven for Maintaining Purchasing Power (Nielsen IQ Data – P1 to P8 2023)

The impact on the mix between private label brands (MDD) and national brands (MN) is a crucial issue at present, and recent figures indicate that Private Label Products have come out on top in this competition.

When looking at the data, we observe a significant increase in sales value for both MN and MDD. However, Private Label Products seem to have gained the upper hand with a revenue growth of +17%, while MNs recorded a more moderate growth of +6.6%. It is important to examine this trend more closely while keeping in mind two potential biases.

Firstly, the figures do not mention sales volumes, which are crucial for assessing the real impact. The increase in revenue could be due to higher selling prices, so it is essential to understand how volumes are behaving. According to previous data, it appears that volumes have also increased, likely due to the shift in purchases from MN to MDD.

Secondly, the percentage difference in growth between MDD and MN can also be explained by lower facial prices for MDD compared to MN. Thus, a price increase of a few cents for MDD translates into a higher percentage than for MN, which can distort the perception of growth.

Furthermore, while inflation slightly decreased in August 2023 compared to July 2023, with an increase of +11.6% compared to +16.8%, it is important to note that inflation persists. This relative decrease should be put into perspective with an increase of +10.3% in August 2022. This means that although inflation has decreased compared to its recent peak, it remains at a high level and continues to impact production costs and selling prices, partially explaining the trend towards Private Label Products, seen as a more economical option.

The Rise of Private Label Brands in France – A Fundamental Trend Requiring Innovation

The growing prominence of private label brands (MDD) in France is a phenomenon that cannot be ignored, but it should be viewed in the context of the situation in our European neighbors. According to Nielsen IQ U GLOBAL data, private label brands continue to grow in France and have reached a market share of 34%, a level not seen since 2016. It is important to note that this growth of MDD is influenced by various factors, including laws that regulated the price wars and the resurgence of national brands (MN).

In the MN sector in France, it is the major groups that are performing the best, with a growth rate of +7.5%. This performance is partly explained by customer loyalty to MN. Some national brands have successfully built strong bonds with their consumers, which encourages them to remain loyal to these products, even in the face of competition from MDD. For example, iconic brands like Nutella retain their appeal because, for many consumers, they represent a reliable and irreplaceable choice.

National brands have also adopted aggressive promotional strategies to maintain their competitiveness. They often have the financial means to offer substantial discounts, sometimes up to -34% on certain products. These promotional offers are an effective way to retain their customer base and counter the appeal of Private Label Products.

On the MDD side, the data reveals an interesting trend. Standard Private Label Products are the largest in terms of market share and continue to grow significantly, with a growth rate of +16.6%. However, it is worth noting the explosive growth of budget or “first price” Private Label Products, with an impressive growth rate of +46%. This increase indicates that more and more consumers are willing to opt for basic products at very competitive prices, possibly as a reaction to rising prices in many sectors.

In summary, Private Label Products seem to have an advantage in terms of revenue growth compared to MNs, but it is essential to consider sales volumes and price differences to get a complete picture of the situation. Moreover, inflation, although slightly decreasing, continues to weigh on the economy and influences consumer choices. The competition between Private Label Products and MNs continues to evolve in a constantly changing French market.

Private Label Products Proving Their Value Through Innovation

Private label brands (Private Label Products) need to demonstrate their value through usage. As consumers increasingly turn to Private Label Products, this is also an opportunity for them to prove their worth in new areas. Innovative cosmetics that are “clean” with significantly reduced packaging impact, effective cleaning products that require minimal effort and use fewer resources, or durable and reusable electrical products that are practical both indoors and outdoors are just a few of the solutions that KAPA REYNOLDS can offer for a market launch within 6 to 12 months.