Singapore's groceries to see heightened demand for private labels

Grocery retailers were urged to seize the opportunity to amp up their private label offerings.

As Singapore’s consumers are expected to remain price-sensitive, mass grocery retailers (MGR) are expected to see a renewed demand for private label products that were previously shunned when consumers were not under pressure, according to Fitch Solutions.

The country’s consumer spending is expected to remain under pressure over the medium term, which will lead to a reduction in discretionary expenses as consumers prioritise spending on essentials, so private labels are tipped to remain popular over the medium term.

“In the past, consumers often recognise private label goods as 'cheap' and/or 'inferior' products. The pandemic has since voluntarily and involuntarily shifted the consumers' buying behaviour, with consumption of private label products increasing due to their attractive price point,” the report said.

Fitch highlighted an opportunity for MGRs to strengthen their private label offerings and capitalise on this opportunity by conveying the value proposition and advantages that their products offer in contrast to name brands.

“MGR should seek to solidify their private label positioning in the consumer's mind, to retain consumers loyalty to the MGR and prevent them from switching back to their preferred brands post-Covid to maximise value extraction,” the report added.

NTUC FairPrice, Singapore’s largest MGR, recorded a 25% increase in sales of private label products between March 2019 and June 2020, when compared to the same period 15 months prior.

In 2020, MGR Giant revised and launched the new private label line Meadows with over 300 different items, spanning across fresh produce to snacks. Meadows was met with immediate success, topping the sales chart for various categories.

In a bid to serve consumers of varying income levels, MGRs have also been diversifying their private label portfolio. For example, NTUC FairPrice has distinct lines for different consumer profiles, such as FairPrice Gold (premium), FairPrice (basic), and SmartChoice (budget).

In 2020, the country’s MGRs recorded an average yearly sales volume growth of 30.67% YTD (January-November), surpassing the average yearly sales volume growth of 0.47% between 2014-2019.

This was hugely exacerbated by the pandemic in several aspects, but several retailers have noted that consumers are increasingly moving down price points, revitalising the demand for private label products.