Discount leads the way in private label

Discount formulas’ emancipation, started by Lidl, helped evolve private labels, from their position as price breakers to their distinguishing position in formulas built on their private labels or fancy brands.

Quality

Alexander Kottke (Euromonitor) talked about the “Future of Private Label” at the most recent PLMA Trade Show in Amsterdam. RetailDetail was present and interviewed him about the upcoming changes for private labels.

Alexander, you have your main office in London, in a market where retailers are at the forefront of private label development and positioning. Are other countries catching up?

“Private labels have gained a considerable market share in most Northwest European countries. Retailers are not only gaining market share with cheap private labels, but also with premium private labels. However, we see a clear distinction between Northwestern Europe and Eastern Europe (including Russia). The private label industry is considerably larger in the former, with a 125 billion euro annual turnover, compared to a mere 10 billion in the latter. The United Kingdom is still the pioneer, partially because of its own retailers and partially because it is also the gateway for developments from the United States.”

How do discounters contribute to private label development?

“They play a huge part. They benefited from the crisis and captured a significant portion of the market in plenty of countries. Their UK share doubled (12 % in 2017’s first quarter, according to Nielsen) in the past decade. Not only their price aggression and the fact that consumers now appreciate their quality more have helped. Their ambitious private labels have also contributed to their growth. Consider for example their bio focus. In specific product ranges, discounters can compete with service supermarkets’ bio private labels, especially when it comes to pricing.

More sustainability

Do private labels face each other more so than they do name brands nowadays?

“They do. At first, we had horizontal pressure, towards the higher echelons of the price scale, but now we see presure from other retailers’ private labels. Pricing is an issue, but also the values (like sustainability) retailers “instill” on their private labels. Some retailers are highly innovative in this regard: Albert Heijn sells herbs it grew in the stores itself. Not necessarily more sustainable, but nevertheless, a way to surprise the consumer right there and then.”

Can retailers “cast aside” name brand manufacturers with their private labels when it comes to presentation and communication, especially since the private labels are ever-present across every product category?
“Definitely. “Health & Wellness” offers opportunities for a private label product range that spans several categories. Everything with a healthy (or healthier at least) approach could then be part of this private label: meat replacements, soy drinks, less fat, less sugar, …. It could be a challenge to present this as a whole, as a family of products. This could definitely pose problems if certain items have an expiration date and others do not. Look at Swiss Coop’s Karma, its own private label that spans several categories focused on vegetarian and vegan products: meat replacements, muesli bars, ice cream and spreads.”