The study conducted by master’s students Frida Lesniak and Greta Berzell is based on observations of 18 different product categories in 21 stores belonging to Sweden’s three largest grocery retail chains. The results show that private-label products (PLPs) are allocated a disproportionately large share of shelf space relative to their market shares, a phenomenon known as shielding. This suggests that retail chains actively use their control over the in-store environment to strengthen the position of their private labels.
AgriFood’s report by Christian Jörgensen concludes that sales of retailers’ own brands have increased sharply over the past twenty years. According to Jörgensen, the food industry’s margins have been significantly squeezed, as consumers increasingly tend to value private-label products and manufacturers’ brands similarly. The milk market is one such example, where private labels have rapidly captured large market shares, accelerated by recent sharp price increases that have heightened consumers’ price sensitivity.
Likely Lower Prices for the Average Consumer
The expansion of private-label products has likely benefited many consumers through lower food prices. For many—but not all—Swedish food companies, however, this development has meant lower margins due to a weakened bargaining position vis-à-vis grocery retailers.
The master’s students argue that their study demonstrates that shielding occurs across the three retail chains and the various store formats they examined—findings that AgriFood now confirms in its study spanning a 20-year period.
“Retailers claim that they allocate shelf space based on market share, but this study tells a different story. Here, chains give more space to their own products than their market shares would justify. They are not breaking the law, but their behavior reflects a power imbalance in which food producers end up in a position of dependence,” says Ulf Johansson, Professor of Marketing at the School of Economics and Management, Lund University.
Hur påverkar EMV konsumenterna och livsmedelskedjan? (article in Swedish) – agrifood.se
Private Label Shielding: Myth, Manipulation, or Misconception? – lup.lub.lu.se