Own label has finally learned to go its own way. After years of doing little more than bring out copycat versions of branded goods, retailers - those in the UK at least - are not only bringing out ‘good’, ‘better’ and ‘best’ own-label ranges that are brands in their own rights, they’re also launching innovative venture brands that don’t even bear their names.
The upshot? Own label now commands an intimidating 50.5% of UK grocery sales by value - the highest share in Europe, perhaps the world [Kantar Worldpanel 52 w/e 10 June 2012]. There’s just one problem. Despite gains in some key categories (see p56), this has remained more or less static for the past three years as brands have increased promotional activity while retailers have scaled back deals on own label.
Conversely, in still brand-dominated international markets, own label’s share is growing rapidly, albeit from a low base. In Greece, it has jumped an incredible 4.6 percentage points since 2010 to 24%. Spain and Germany have also seen significant growth, from 39.8% to 42.7% and 33.4% to 36.8% respectively [SymphonyIRI 52 w/e 30 December 2012].
World of Private Label show
What: A show dedicated to the cream of own label from around the world, featuring 2,100 exhibitors from 70 countries
Where: RAI Exhibition Centre, Amsterdam, The Netherlands (15 minutes from Schiphol International Airport)
When: Tuesday 28 May & Wednesday 29 May pre-show seminars on afternoon of 27 May opening hours from 09.00 to 18.30 (to 16.30 on the Wednesday)
Most people don’t have time for a global fact-finding mission to find out what’s hot in own label. Instead this show brings the world to them (well, Amsterdam). Featuring exhibitors from a range of food and non-food disciplines, this year’s is set to be the biggest yet. Contact email@example.com to register your attendance.
With international markets holding such huge growth potential for Britain’s own-label manufacturers - and indeed retailers - it is no wonder next month’s World of Private Label show is set to be the biggest yet (see right). So what can UK players bring to the party and where do the biggest opportunities lie?
Arguably one of UK own label’s greatest advantages is its relative sophistication. While in many overseas markets, own label is still viewed as a cheaper - and often lower-quality - alternative to brands, Britain has changed people’s perceptions of own label with its tiered ‘good, better, best’ lines and more recently, venture brands such as Tesco’s Chokablok and City Kitchen.
It also does some of the best healthy-eating, environmentally friendly and foodie own-label ranges. That’s why this year’s British representatives at World of Private Label will include Morrisons’ Nu Me range in the health category, chosen for its use of a highly visible calorie count on the packaging, and Asda’s Extra Special range, developed in partnership with Leiths School of Food and wine.
The virtue of such ranges is that they can compete with brands and beat them at their own game. “The tiering of own label works on an emotional as well as functional level by providing a clear reassurance that you’re buying best in class, for example, when shopping for a special occasion,” adds Paul Beresford, MD of Cambridge Market Research.
Look no further than products such as Waitrose’s Hidden Orange Christmas Pudding by Heston Blumenthal or Asda’s Extra Special range developed with Leiths for proof of how retailers have premiumised own label to create brands in their own right.
This has helped retailers raise the price they charge consumers for own-label goods to the highest in Europe. On average, own label sells for about 80% of the price of branded alternatives in the UK. The average in Europe is 70% while in France and Germany own label commands about 60% of the price of brands and in Greece that figure is 55% [SymphonyIRI].
” Asia provides access to a large consumer market and a high-growth environment” Chris Bull, McBride
Hence the calls from markets around the world for British expertise in developing mid and upper-tier own-label offerings. “Our skills are increasingly being required around the world as markets for own label develop,” attests Ian Schofield, sales and marketing director at Sun Branding Solutions, a packaging design agency specialising in own label.
Many experts point to Southern and Eastern Europe as particularly bullish markets - thanks often to the fragile state of their economies. In Italy, for example, retailers Conad and Esselunga have grown own label share at the expense of brands to ease the burden put on consumers by the 2011 hike of VAT to 21%. The planned rise to 22% in July looks set to further play to own label’s advantage.
As the Portugese economy continues to shrink, supermarket chain Continente is also paying increasing attention to own label, adds Schofield. In Greece, no stranger to economic strife, own label’s share of grocery sales has doubled in the past five years [SymphonyIRI]. And in Spain, where the supermarket chain Mercadona has espoused a strategy similar to Asda’s Every Day Low Pricing by pushing the value end of its own-label range, both Mercadona and rival Eroski are boosting their offers by entering non-food, with new perfumery and health-orientated lines.
UK companies are unsurprisingly eyeing such markets with great interest. Tesco’s launch of venture brand Chokablok in Central Europe in July, 2011, and into UK zoos and theme parks a year later, shows British own label can find success overseas and even outside the stores of the retailer that owns them.
Suppliers too are alert to the potential. “We see a tremendous opportunity to take high value capacity boxed facial tissues into Europe, where historically facial tissue penetration has been very low,” says Frank Millward, marketing director at paper products manufacturer Accrol Papers.
Meanwhile, British personal care and household goods manufacturer McBride has cast its net further east, with Hungary, the Czech Republic and Turkey among the company’s star performers on a list topped by Poland, where its sales grew 29% in the first half of this financial year.
There’s growth to be had even further east still. “Asia obviously provides access to a large consumer market and a high-growth environment,” says McBride CEO Chris Bull, pointing to the company’s existing production facilities in Malaysia, Vietnam and South China. “But above all it provides us with the opportunity to be on the ground and to work closely with retailers to develop private label”.
McBride’s Vietnamese and Malaysian operations also give a base for exports of personal care goods into Australia, another market of growing interest to own-label players. “We have seen a lot of exporting of British retail skills to Australia recently,” says Schofield.
Indeed, Aussie retailer Coles announced a UK recruitment drive in March 2012 and last Christmas began stocking Waitrose’s Hidden Orange puds, suggesting own label is starting to evolve Down Under in much the same way it already has here.
“With the development of online services, there are more touch points than ever before,” adds Schofield. “Consumers have more ways of comparing products. That’s why retailers are going for points of difference with own label. In the UK we’ve been in own label for 30 years - others have been in it for 10. We’re much further along the learning curve.”
And what better occasion than the World of Private Label show to demonstrate that the world really is the UK own-label industry’s oyster?