This is the next in a series of interviews Christopher Durham, founder of My Private Brand, will conduct with private brand leaders around the world. Today, he discusses retail-owned brands and their evolution with Michael Rahbek, Head of Private Label at Danish retailer Dagrofa.
Michael Rahbek is a highly accomplished visionary combining outstanding sales, marketing and business development talents with over 10 years experience both from A-brands and Private Brands. He has worked with Unilever and Coca-Cola and is now responsible for driving the overall Private Brand development of the Vertex Award winning, Danish retailer Dagrofa, while also playing an important role internationally as a board member of United Nordic and a member of the commercial committee at the European buying group, EMD.
CD: What is your first memory/experience with Private Brand?
MR: From a professional point of view, it was during my employment at Unilever on “the other side of the table.” I remember the different retailers launching their own series of products, which put pressure on us back then to increase our margins and increase our degree of innovation. When I started up the Private Label department at Supergros (later renamed to Dagrofa), we had the more traditional “me too” approach vs. the A-brand. Our journey has helped me evolve from the traditional “Private Label” approach to the more strategic and consumer-oriented Private Brand solution.
CD: What does the future of retailer owned brands look like?
MR: Overall, I expect a stronger consolidation of the traditional A-brands in order to keep up with the fast development of retailer-owned brands. Retail brands will overall increase their importance, both in sales and revenue, in categories where Private Brand already has a strong preference. But new categories will also be conquered.
The reason is quite simple; where traditional A-brands have had limited success in understanding changing consumer needs and have neglected important category development through innovation, Private Brands will win. I gave a speech to a group of sales directors where I was asked how big the private label share will be and I answered honestly: You decide yourself. If you don’t develop the categories, your brand equity will diminish and loyal consumers will turn their backs on you.
I also expect some categories where private brands will play a different role due to strong A-brands who continue to invest. I profoundly believe in the coexistence between Retailer Brands and the traditional A-brands.
CD: Retail and the shopper has dramatically changed over the last few years (mobile, online, social media, Amazon, Google). How have your private brands responded to these changes?
MR: We engage with a full blown So-me strategy and implementation, hence understanding that these are very important in connecting with the end consumer. Actually, the importance and breakthrough of social media allows us to engage with the end consumer in a totally different way than was possible just a couple of years ago. This is also how we strive to create our own brand ambassadors, hence increase our brand equity in the end.
CD: What private brand accomplishments are you the proudest of?
MR: Changing our strategic view of Private Label into Private Brands was a key decision the company took three years ago.
We have a somewhat progressive working title to our strategic project called, “Private Label is dead.” We did a total revamp of our strategy, understanding the importance of building retailer brands that understand the needs of the consumers.
We eliminated almost 20 different category brands, and spent a lot of time engaging with consumers, understanding their behavior and feelings towards private brands – and actually got a strong insight. Often, a consumer will have no idea if a brand is a Retail Brand or not – except if the brand carries the name of the banner.
That is why we also decided not to use our banners on the products of the brands.
Based on insight, we developed a cross-category food brand called Gestus (In English, “gesture”), focusing on food categories. We have the mission to create good quality products with superior designs and a strong communication platform. Two years after the launch, we now see a number of consumers who do not associate Gestus as a Private Label, but as a “real” brand. This is quite significant.
CD: How have your private brands evolved over the last few years?
MR: We are consolidating a number of brands into a strong consumer concept, strongly focusing on consumer trends and category development. This has really had a very positive effect on the sales of our Private Brands. It’s funny however, that both internally and externally, we have a strong desire to discuss A-brands vs. Private Brands. In our research, we found out that especially younger consumers often see Private Brands as the A-brand.
CD: Is private brand a strategic priority for your organization?
MR: Yes, both in relation to overall sales, revenue and also creating differentiation in the market. We are very keen on keeping our focus on creating strong concepts that will give us a competitive advantage towards our main competitor. The Danish market is very heavily dominated with price promotions on A-brands in order to lure consumers into the stores. Once they are in, we will try to use our Private Brands to create loyalty to our own brands, ideally creating what we all strive for – loyal consumer to our store formats.
CD: How important is strategy to the success of private brands?
MR: Without a clear strategy you have nothing but an “old private label” approach and a road with a lot of curves. Private Brands must act, behave and be treated as any other A-brand, with the same high level of focus on reaching the designated target. This can only be done if you have a clear strategy in mind and have a full understanding of both customers’ and consumers’ needs.
CD: What role should design play in solving private brand/retailer problems
MR: Given the fact that we mostly battle in the store, neck-to-neck with a well-known A-brand, design plays . When we design our products, we always have a key consumer point of view in mind. Our ultimate goal is that a consumer should have no issues putting our products in their lives and homes.
CD: What advice do you have for retailers trying to take their brands to the next level?
MR: Focus on the needs of the consumer. The traditional consumer and customer models are changing and becoming obsolete. Consumers today have different buying patterns and habits which maximize the level of complexity even further. Having the assumption that a Retailer brands can’t create the same value as a traditional A-brand is both an internal and external barrier that needs to be addressed. Treat your brand as a real A-brand and select the categories where the traditional A-brands have lost their momentum or predict which categories are next. Usually, investigation and analysis of the Private Brand development in other countries will likely give you the answer to which categories are next.
CD: What do you look for in great brand design? How can design help retailers and their brands differentiate? What does differentiation mean to you?
MR: Our ultimate goal is to design products that consumers will recommend or have on the dinner table when having guests over. This means we strive to understand the relevance of shelf impact since also understanding how important it is so as to be viewed as attractively as possible in the eyes of the consumers. As consumers, we tend to buy traditional A-brands because they satisfy an underlying need in our brain to achieve the benefits communicated in their marketing. This is also why some consumers shop till they drop.
CD: What advantages does private brand have over national brands. What disadvantages?
MR: One factor is actually what A-brand usually say is their key advantage: innovation. As Retailers, we can, in fact, react very quickly when it comes to changes in the consumer’s needs. We have a less complex organizational structure and can react very quickly. And we have the ability to develop solid cross-category concepts and products that make it easier for consumers to navigate.
One key disadvantage is that Private Brands traditionally do not use a mass marketing solution to promote ourselves. However, my personal view is this will significantly change over time.
CD: What keeps you up at night?
MR: I am very keen to make business progress and I hate to miss out on a great business opportunity. J I strive to deliver innovative solutions to the Danish and Nordic consumers through a strong understanding of the consumer decision tree, and upcoming trends.
On a day to day basis, we monitor the development of raw material prices, which in the latest year have had some significant ups and downs. That is actually something that can keep me up a little bit at night.
CD: How did you get into the private brand business?
MR: In his old job as category director, our group CEO called me up to hear if I had any candidate names to recommend for the position of head of private label. After giving out a few candidates, he actually asked me why I did not consider the job myself. After many months of great discussions, I agreed to take on the challenge. Back then, I asked myself if Private Label was really that interesting. Looking back from where I am now, the answer is a clear Yes!