Big brands face struggle to contain own label advance in Europe

* Big brand products protect share thanks to promotions

* Rabobank sees private label taking half market by 2025

* Own labels helped by discounters, e-commerce, innovation

By Emma Thomasson and Martinne Geller

BERLIN/LONDON, Jan 26 (Reuters) - An expensive fightback bytop consumer goods brands is likely to provide only temporaryrelief as retailers improve the quality of their own products toattract thrifty European shoppers.

Sales from supermarkets' own label ranges have surged inrecent years. Cash-strapped shoppers seeking cheaperalternatives to branded favourites have also flocked to discountchains that keep prices low by stocking few top names.

For household goods companies like Nestle andUnilever , the advance of private labels haseaten into market share and dented prices and margins.

"Low prices are what matter most. People don't care so muchabout big names nowadays," said pensioner Lydia Schroeter afterbuying own brand yoghurt at a Lidl store in central Berlin.

However, own label sales are showing the first signs ofslowing down in Europe as established supermarkets slash priceson top brands to try to halt the rapid expansion of discounterslike Germany's Aldi and Lidl.

For the first time since 2007, own label products lost 0.1percentage point of market share in 2014 to 38.7 percent,according to research firm IRI, with slowdowns or declines seenin France, Spain, Italy and the Netherlands. IRI assessed datafor sales of packaged consumer goods from stores across sevenEuropean countries.

"We will continue to see brands forcing the pace in pricecutting in future and this will continue to put own label underpressure," said IRI director of strategic insight Tim Eales.

Supermarkets may make more profit with their own labels, butshoppers expect them to stock a broad range of brands and pricethem competitively.

As stores seek to stand out from discounters, they areincreasingly promoting brands. UK supermarket group Tesco just cut an average 25 percent off 380 branded items,as it fights to recover from a series of profit warnings and anaccounting scandal involving supplier payments.

Unilever, maker of products like Dove soap, expects to winback shoppers as they benefit from lower oil prices and see thatbrands are not much pricier than own labels.

"Will they really want to go to a hard discounter or willthey look to go to a more friendly store?" finance chiefJean-Marc Huet asked in an interview with Reuters.

In France, the market share of own label goods shrank 0.5percentage points to 29.1 percent in 2014, as retailers likeCarrefour fight discounters by cutting shelf space fortheir own goods to promote brands.

"Some good work has been done by big brands," said AntoineGiscard d'Estaing, finance director of France's Casino, highlighting more attractive prices, new products andheavy television advertising.

SHORT-TERM EFFECT

However, brands' growth can be ephemeral if driven bypromotions -- when the deals end and prices rise, private labeldemand returns.

Rabobank predicts private label will ultimately resume itsgrowth trajectory to account for half of the European market by2025, driven by discounters, more innovative products and thegrowth of grocery e-commerce. Consumers are less brand-consciousfor the bulky staples they tend to buy online.

"Up until recently, private labels mainly copied big brands,now the best ones are innovating," said GeraldLindinger-Pesendorfer of German consultants Dr. Wieselhuber &Partner.

"The more professional they are, the more retailers can useown labels to differentiate themselves from their competitors."

Britain's Marks & Spencer cited innovation in itsdesserts and party food as the driving factor behind bumper foodChristmas sales. M&S scored with creations like a "WhiteChocolate Snow Bombe" and "Savoury Jelly Shots".

"Ninety percent of our products are incomparable to whatother supermarkets have," said Chief Executive Marc Bolland.

M&S Food has focused heavily on categories with leastcompetition from brands, like frozen, chilled and fresh foods.It does less in areas like confectionery, personal care andalcoholic drinks, where brand loyalty is strongest.

"As a student, price is the most important thing to me but Iwould never buy shampoo or cosmetics from Lidl," said Germanmedical student Emma Hammer.

But even those categories are not totally safe.

Waitrose, a supermarket chain catering for moreaffluent Britons, sells a "Seriously Intense" line of premiumice cream and chocolate, a rival to Unilever's Ben & Jerry's.

In Germany, consumers rank the Balea beauty range made forthe DM chain almost as highly as Beiersdorf's Nivea. (Additional reporting by Dominique Vidalon in Paris)