Comment: McBride cleans up in tough times

24th Jun 2009 14:39

Since the onset of the credit crunch, there has been much talk about cash-strapped consumers stocking up on supermarkets' own-label products rather than paying extra for branded items.That tendency was confirmed today by McBride, the private label household and personal care products supplier, which said it expects underlying profits this year of not less than £35m after better than expected fourth quarter revenues.McBride, which operates in the UK, France and Italy, said it was "benefiting from private label gaining market share in our major markets."While McBride seems to be benefiting from consumers' new-found tight-fistedness, companies such as Unilever appear to be suffering from it. Last month, firm behind Dove soap and other well known brands reported a fall in profits and admitted that "there has been some down-trading to private-label brands." The rising appeal of supermarket's own brands was also commented on by the market research group TNS, which noted yesterday that the retailer Waitrose was benefitting from the launch of its 'Essentials' range.But gauging consumer behaviour in the current climate is not as easy as it might seem. Companies such as Dairy Crest, which depend heavily on brands, have also been doing well. Reporting higher revenues in the year to March 31, the dairy products firm said last month that shoppers still saw the appeal of brands, such as its own Country Life butter and milk, despite the recession.And buying own-label products does not necessarily mean down-trading. Products such as those sold under the 'Taste the Difference' label of the supermarket Sainsbury's are often more expensive than those of branded competitors. Not all products made by McBride are at the bottom end of the range.In truth, while we may be in the midst of a deep recession, shopping habits remain complicated and firms do not necessarily need to move to the value end to find their niche. Rather than obsessing about consumer behaviour, McBride appears to have focused on the supply side, aggressively cutting costs to become a more nimble operator within the private-label area. Margins in the full year improved from 3.9% to4.4%, with second half margins exceeding 5%.The firm also announced some new contract gains today, underlining its strong position.Even if the economy does start to pick up soon, private label products seem likely to remain popular helped by continuing consumer caution and less snobbish attitudes to own-brand goods. Having shown itself to be a nimble operator within the sector, the future looks bright for McBride whatever course the economy takes.