Beware, Excitement Ahead: Private Label Evolving!

UK supermarket chains continue to knock seven bells out of each other as they struggle to come to terms with hard discounter level prices. Even upmarket Waitrose is not immune and its “Pick Your Own Offers” gives loyal shoppers 20% off their 10 favourite items from a list of 950 eligible products. Expensive (maybe costing the retailer and suppliers $400 million p.a.) but smart as it plays directly to the trend of sculpting an overall offer to customers that is personal to them. Fair play to Tesco, its early use of ClubCard data was a move in this direction, too. Combine price-matching promises with personalized offers and a private label range unique to a particular retailer, then, the business has a base from which it can differentiate its offer from the competition.

Marks & Spencer. Fine tunning private label ranges to the changing consumer needs.

Marks & Spencer. Fine tuning private label ranges to the changing consumer needs.

Private label developments are dynamic in the UK (and elsewhere):

  • the cheap and cheerful “price fighter” role of private label, still current in many countries, is long gone in the UK. British supermarkets were early adopters of 3 tiered “Good, Better, Best” ranges, with Tesco finest* and Sainsbury’s Taste the Difference leading examples of premium PL. In France, Carrefour has scored well with Reflets de France  emphasizing traditional products with provenance. Now, the PL hierarchy is more complex;
  • ranges for kids, organic and natural foods, Free From, weight reduction and for health maintenance have been introduced. Marks & Spencer’s count on us has led the way in calorie-controlled PL and Fuller for Longer products for those struggling with weight management. Loblaw’s President Choice Blue Menu products for good health have been very successful. As has Kroger’s simple truth umbrella PL brand for organic, natural and free from foods generating over $1 billion sales in its launch year and narrowing the perceived quality distance between its fascias and Whole Foods Market;
  • in countries with significant ethnic populations, supermarkets have sought to take share from independent retailers with a strong immigrant clientele – e.g. Carrefour Halal, and Loblaw’s T&T Asia range;
  • not all initiatives have been successful and Tesco tripped up at both ends of the market – with “faux brands” (exclusive to Tesco but unknown to anyone!) to take on hard discounters Aldi and Lidl; and venture brands designed to take on blue chip fmcg products (e.g. Tesco’s Chokablok in confectionery and Parioli in Italian gourmet foods).

Tesco's Three Tier Structure applied on many products: Essential Value for the first price, and *finest is the Premium product.

Tesco’s Three Tier Structure applied on many products: Essential Value for the first price, and *finest is the Premium product.

Our view is that these are very exciting times in private label development:

  • a blaze of PL products across categories can make a big statement and create much needed theatre to announce the arrival of Christmas or Spring and reinforce across the store the superior values of one retailer over another; e.g. M&S removing hydrogenated fats from all its food products 10 years ago and staked a claim to be the leader in healthy foods, and the Coop took an early ethical stand on Fairtrade issues. Look, too, at Iceland launching a range of American foods prior to the July 4th Independence Day celebrations;
  • through innovation and great shelf presence, a branded manufacturer can influence shopper interest in one category but the retailer has the entire store as its palette! Lifestyle brands can cross not only categories but departments. Morrisons NU ME covers foods whether they be fresh, chilled, frozen, or ambient and promises “all your favourite foods, only healthier”;
  • sometimes retailers simply accept that they do not have the credentials in key areas – artisanal baking is a case in point and Tesco purchased The Bakery Project from Hackney and Euphonium Bakery from North London to place them in key stores. This is hardly private label but they are brands which are exclusive to Tesco;
  • in fresh produce, a department which is essentially unbranded (we don’t think many shoppers hang their hats on buying an Asda cucumber, they just buy a cucumber that is sold in Asda!), retailers can use “Especially Selected by Our Buyers” or “Limited Edition” to indicate that this retailer has particularly strong credentials in fresh fruits and vegetables and strong links to the best producers;
  • it’s a safe bet that there will be further segmentation and development of sub- and sub-sub ranges in PL which will bring supply chain management complications but, hopefully, better shopping experiences for consumers.

Don’t forget, grocery chain owners can and do adapt the offer in each store to meet the particular needs of the store’s clientele. Wow! Add this to super-segmentation in private label and multi-channel routes to the consumer – the world of grocery retailing is just going to get more complex, challenging and, certainly, more exciting. Yippee!

Tesco brands the whole bread section to create theatre.

Tesco brands the whole bread section to create theatre.

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About the authors
Prof David Hughes: Around the world, David speaks to senior agribusiness and food industry managers about global food industry developments that are and will affect their businesses and industry. Energetic, engaging, humorous and insightful, David gains the very highest evaluations at seminars, conferences and Board level discussions in every continent he visits. Miguel Flavián: works for several Spanish organisations and companies to help them to learn from the developments of the British grocery market and improve their business back home.
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