Planet Retail: private label accelerates during downturn

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Carrefour Discount: budget private label

Carrefour Discount: budget private label

Private label has increased its penetration across Europe during the economic downturn and is poised for further sustained growth and increased marketing support.

Those are the findings of the latest Planet Retail latest research – Private Label growth drivers for 2012 and beyond  – presented in a web cast by research director Matthew Stych and Amina West, VP Northern Europe, Trace One, a company specialising in private label product development and management.

Private label accounts for over a quarter of supermarket shopping in Europe, the research reveals. Share has been driven by markets including Switzerland, which has the highest private label penetration at 46%; the UK and in Germany, where Aldi and Lidl dominate.

Penetration is lowest in markets including Turkey and Russia, where retailing is more fragmented.

One of the main drivers of private label growth is retailers expanding along the price:quality scale.

At the budget end of the market, retailers including Carrefour, Tesco and Metro are driving entry level private label sales with two strategies emerging.

Metro and Carrefour, for example, have repackaged value lines in stark packaging but with their names to the fore, for example, Carrefour Discount. 

Tesco has taken a different approach. According to Planet Retail, it has been hemorrhaging market share to discounters and therefore launched so-called fantasy brands – its own version of discount brands.

At the opposite end of spectrum, retailers have been pushing the boundaries in premium private label, Planet Retail finds.

Tesco Finest Restaurant Collection: targeting consumers trading down from restaurants

Tesco Finest Restaurant Collection: targeting consumers trading down from restaurants

Menu from Waitrose: new premium range

Menu from Waitrose: new premium range

Examples include the Menu from Waitrose range and the Tesco Finest Restaurant Collection, with ready meals retailing at around the £10.00 price point. 

According to Planet Retail, the dishes are designed to capture consumers trading down from restaurants.

Tesco has also launched F&F Couture, an extension of its clothing range with initial prices including a dress retailing at £140.00.

“That’s been discontinued for the time being but Tesco was probing as to where the limit was,” says Stych. “Now the most expensive dress is around £60.00,” he says.

The move along the price quality spectrum in private label and away from a traditional three-tier model (value, standard and premium) has been most apparent in the UK, reports Planet Retail. Today’s offer is more likely to comprise two value ranges (including discounter brands), a standard range, premium range and super premium offer. Standard private label is tipped to play a lesser role in future. However, retailers including Asda and Sainsbury’s have recently refocused on their standard offer and are pushing the quality message.

Asda’s Chosen by You range, for example, features products that have been taste tested by shoppers.

“We’re sending a clear message that Asda will now drive as hard on quality as it does on price,” said Asda chief executive Andy Clarke, at the time of the launch. 

Sainsbury’s relaunched standard private label offer – by Sainsbury’s – also stakes the supermarket’s reputation on the range.

In addition to extending private label price points, retailers are exploring themed niches, reports Planet Retail. Examples include organic, eco, kids and ethnic ranges.

In Scandinavia and Central Europe, these ideas are new but will be a key driver going forward, it says.

In the UK, Tesco has already moved into private label niches such as its Bnatural health and beauty range, Ingredients, discount and super premium brands. Sainsbury’s is strong in gluten and free from segments, while Asda has carved a position in kids’ products. 

Further examples include Casino’s Wassila range of halal meats in France and Kruidvat’s homeopathy range in the Netherlands.

“Retailers are in an ideal position to exploit these niches,” says Stych. 

Regional ranges present another opportunity, claim researchers. 

In countries including Germany, Austria, Italy and France, national retailers are launching regional private labels.

Austrian retailer Sutterluty, for instance, reports regional labels have grown to 30% of sales; while Carrefour’s Reflets de France showcases locally produced products.

Carrefour’s Reflets de France: local products now sold via Ocado

Carrefour’s Reflets de France: local products now sold via Ocado

A further private label trend is for licensed brand owners to launch retail branded private label products, once the bastion of manufacturers. Examples include Carrefour teaming up with Disney and X5 in Russia partnering Ice Age 3.

The information age is impacting private label development too, reports Planet Retail.

Increasingly retailers are providing shoppers with more information about private label products, such as their provenance; showcasing the suppliers; and providing apps, which enable shoppers to scan barcodes to find out more product information online.

Retailers are also aiming to bring products closer to consumers by incorporating messaging that products have been tested by consumer standards bodies. Sainsbury’s relaunched Taste the Difference range, for instance, carries a ‘taste tested by consumers’ badge.

According to Planet Retail, the amount of on-pack information correlates with private label penetration in Europe and is consequently higher in developed markets.

Range reviews and the move to category management is another private label driver, it says. 

Such moves threaten branded suppliers, as retailers cut back to one or two leading brands, but are an opportunity for private label manufacturers.

In Austria, for example, Billa is reported to be delisting weaker, tertiary and secondary brands and launching a standard private label. Similarly, Carrefour is reported to be accelerating private label development and putting its name on more and more ranges.

It has teamed up with Alliance Boots, which is producing a range of health and beauty products, which are sold under the Carrefour brand; and moved into fresh foods.

Rewe is reported to be extending its economy ‘ja private label and has increased its stake in an Austrian meat supplier.

Looking ahead, Planet Retail forecasts private label will increase to 28-29% penetration in the next four to five years.

The faster growth will come from emerging markets such as Turkey, it says, but developed markets will extend their private label presence as well.

Technology will increasingly be deployed to push private labels to consumers, researchers claim.

Niches will continue to be exploited such as Asda targeting the Asian population with ethnic private label dresses; and Marks & Spencer focusing on seasonal events such as Valentine’s Day.

Own brands will extend into services as well, says Planet Retail, and be sold via third parties such as Carrefour’s Reflets de France range, which is now sold through UK online retailer Ocado.

Beyond 2012, growth in private labels will continue and the pace of npd will accelerate. 

“A slow recovery and second recession combined with a focus on quality will sustain growth in private label in the future,” says Stych.

Consumers will demand more transparency and technology will underpin growth, he adds.

But it’s not all plain sailing for private label and the threat beyond 2012 is that competition authorities will pay increasing attention to private labels.

“Private labels will increasingly acquire brand status but further growth will bring risks and scrutiny,” says Stych.