English Private Brand Growth: Opportunity & Threat

Take a look at this interesting report from the English website FoodManufacture.co.uk, daily online free-access news service seeks out news stories and data of value to decision-makers in food and beverage development in Europe. The article presents an interesting snapshot of Private Brand growth in the United Kingdome and Tesco’s evolving retail and Private brand strategy.

Own-label growth: Opportunity or threat?

Increased penetration of own-label products within the UK retail sector will pose new challenges to branded food manufacturers in coming years, according to a recent webcast by Trace One and Planet Retail.

In ‘Private label growth drivers for 2012 and beyond’, Planet Retail calculated current own-label penetration in the UK at 41%. The firm predicted this will increase to 43% by 2012, with a “refocus on quality” one important factor driving growth.

Less meaningful brands cut
Matt Simister, Tesco commercial director for Group Food Sourcing recently told an industry audience that the retailer planned to significantly cut the amount of “less meaningful brands” it stocked across stores in central Europe.

Current supply ratios see Tesco’s range comprise 15% value/discounter brands, 15% standard own-label, 40% tertiary and 30% ‘power’, where the latter comprise household brand names but also Tesco brands such as Yoo yogurt (pictured) and Chockablok ice cream.

But Simister said the retailer would create space for its standard own-label and power brands, so that future respective volumes would be 15%, 30%, 15% and 40%.

With power and standard ranges growing at the expense of so-called ‘B’ or tertiary brands, experts predict the move will provide strategic opportunities for major players such as P&G and Unilever.

Clive Black, an analyst at Shore Capital told our sister title The Grocer that he believed the move would have profound group-wide implications for Tesco that could affect the UK retail sector.

He also expressed particular concern for what he described as Premier Foods’ “legacy” brands, and said (in May of this year) that these included such products as Paxo stuffing, Oxo stock cubes and Angel Delight, which are struggling for volume growth.

Responding to Black’s comments, Amina West, vice president, northern Europe at Trace One told FoodManufacture.co.uk: “Large retailers are starting to dictate the rules of engagement, even with larger suppliers.”

Interesting market dynamic
However, West said that own-label growth of 10-20% in some categories was “not going to go away anytime soon”, and that savvy manufacturers were those who engaged with retailers to develop new products in this sphere.

Noting an “interesting market dynamic”, she said that own-label growth held opportunities for smaller regional suppliers, which trade bodies were encouraging to engage with larger retailers, “because consumers also want local produce”.

West said: “I do think smaller suppliers have an opportunity to get into Tesco and work with their own-label teams to develop products. Sainsbury’s have also said that supplier choice relates to more than just price.

“Consumers are prepared to pay a little bit more – Waitrose has proven that people will pay more for local, say, organic food that is eco-friendly.”

The webcast predicted that own-label growth drivers for 2012 will include further development of super premium lines by retailers, more regional ranges, a greater emphasis upon attractive packaging, and the establishment of clear brand credentials.

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Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.