Mind the price gap: Will a new price tier emerge in European food retail?

Over the past three and a half years, consumer food prices in the EU have risen, on average, by 30%, with branded products generally experiencing sharper price increases compared to private label products. In some cases, the price gap has increased by more than 10 percentage points.

It will be difficult for brand owners to close this widening price gap on their own. Food retailers, on the other hand, are exploring a new mid-tier price point between A-brands and private labels to repair their margins and maintain pressure in negotiations with larger A-brands.

The successful introduction of this new price point depends on category-specific dynamics, economies of scale, and consumer price sensitivity. The overall opportunity could amount to roughly EUR 15 billion in sales. Notably, private label producers and B-brands are best positioned to benefit from this shift in food retailers' pricing strategies.