PLMA E-Scanner – March 2018
Competition across Europe may be very difficult, but private label suppliers are optimistic about their prospects for growth in the years ahead. A new PLMA survey of 567 manufacturers from 36 countries found that 88% of them say they are optimistic about the outlook for overall growth of retailer brands.
What’s behind the optimism? More than three quarters of the respondents pointed to increased consumer awareness and purchase of private label products. Expansion of premium private label products was cited by 74% of the suppliers, while 64% noted increased consumer interest in value. Nearly two thirds of respondents believe that increased retailer commitment to private label will lead to further growth.
Despite their optimism, manufacturers say there are significant challenges ahead. Providing consistent quality and competition from other suppliers in Europe were the two most frequently cited challenges. Consolidation of private label suppliers, finding enough skilled personnel, and consolidation of product assortments by retailers were also identified.
To get an insight in the survey results, please click here to request the report.
Private label keeps gaining market share in Germany. GfK reports that sales of retailer brands climbed 4%, while manufacturer brands increased only 0.5% in 2017. Private label gains are due to the growth in both the price entry brands (+ 0.5% market share compared to 2016) and the value-added brands (+ 0.3% market share). The increase in private label is reflected in a decline in the middle brands by 0.8% to nearly one third of the market share.
The gains for private label come as retailers enjoyed strong sales last year. The GfK market researchers report an increase in sales of 3.6%, or around six billion euros for food retailers (full-range supermarkets, discounters and drugstores) compared to the previous year, the largest increase since the end of the financial crisis.
Aldi Nord and Süd are talking about ways to work more closely together, but say they are “not considering nor planning a merger”. Aldi Nord and Aldi Süd will investigate whether they can collaborate on marketing and purchasing, specifically in Germany. The goal is to lower costs and take full advantage of scale.
It could be a first step towards the reunion of a company that split in 1961, when brothers Theo and Karl Albrecht split the company in two. Aldi Nord is active in Belgium, the Netherlands and the rest of Western Europe and Aldi Süd manages Middle and Eastern Europe, Great Britain and the United States. Germany is the only country where both divisions are active.
Two grocery retailers are entering the Italian market. Aldi Süd is opening its first stores there this month and is looking to open stores in all regions of northern Italy as well as in Tuscany. The retailer says that 75% of the food products will be sourced from Italian suppliers. The retailer brand offer features a range of Italian SKUs including Regione Che Vai (pasta and cooking oils), I Taglieri del Re (cold cuts), Natura Felice (organic products) and Bontlà (dairy products).
Leader Price discount stores also will be entering northern Italy later this year, following an agreement between Italian retailer Crai and Groupe Casino. The network will be run independently from the rest of Crai's operations, and only a limited number of Crai stores will be converted to the Leader Price banner. The retailer will replicate the standard concept of Leader Price’s French stores, which have a typical size between 300 and 1,100sqm. The ambient assortment is 80% composed of Leader Price private label.
Tesco is reportedly working on a plan to launch its own discount store format in the UK to help it win back customers from Aldi and Lidl. The Sunday Times said the new group would match the discounters on price and carry a far more limited range of products than a typical Tesco store. The group is believed to be working with advisers from Boston Consulting on the format. The newspaper added that private label suppliers are being asked to sign non-disclosure agreements before contributing to the project.
A separate report by The Guardian said Tesco has also been considering a second option, which would involve a Costco-type bulk purchase format, similar to a business the group already operates in Thailand.
Asda in the UK says it will shift to even more of an everyday low price position to compete against discounters. The retailer predicted the market share of the discounters to grow by another 5% by 2022 and that it is determined to make the comparative cost of an Asda basket cheaper.
Asda also says it aims to step up its support for innovation among its private label suppliers. The supermarket retailer is set to launch Asda Innovation Awards and is also promising to match-fund new product development by new suppliers who bring exclusive product development to Asda.
UK grocers are declaring war on plastic packaging. Asda has become the latest UK retailer to outline its plans to reduce plastic packaging. The supermarket aims to reduce the amount of plastic in its private label products and packaging by 10% this year, while working with suppliers to find more recyclable solutions.
Earlier, frozen food retailer Iceland committed to eliminating plastic packaging for all its own label products. Waitrose plans to stop selling private label food in black plastic packaging by the end of next year. The Co-op says that its aims for 80% of its product packaging to be recyclable by 2020, with a long-term goal of 100%.
Lidl will be cutting back the use of plastic packaging in its private label products as part of its programme to reduce use of plastics in Germany by at least 20% by 2025. The retailer wants to achieve this goal through measures regarding packaging and repackaging of private label products, which make up around 70% of the entire product range.
At the same time, Lidl announced that it will ensure 100% recyclability of the plastic packaging for its own brands by 2025. Lidl has already created its own recycling cycle for PET bottles of its Saskia and Freeway brands, which currently ensures a recycled content of more than 60% per bottle.
Aldi is going all in on organic products. It is looking to eventually expand its organic range so that these products are available in almost all major categories. The expansion will see Aldi Süd’s organic range grow almost 30%, from around 240 products currently, to about 310 products by the end of the year, including trial products, seasonal, promotional and standard items at the discounter.
Meanwhile, Aldi Nord, plans to expand its GutBio organic private label to around 350 products, with varying offers depending on season and region. Aldi’s share of organic products in food sales, including private label, rose from 5.6% in 2015 to 6.5% in 2016.
Conad in Italy is investing 25m euros to relaunch its private label range this year. Conad CEO Francesco Avanzini said that the retailer will introduce modern packaging and clearer labels, especially for its premium lines, along with new products that meet the growing demand for sustainability.
The retailer will launch a brand, Alimentum, which will include gluten-free and lactose-free products. There will also be a new beauty care range under the Conad Essentiae brand as well as a new baby product range. Conad’s private label has seen turnover increase by 46% over the last five years, from 2.2 bn in 2012 to 3.2bn euros in 2017.
Finnish retailer Kesko has launched a beauty and wellness store format under the Hehku banner. The stores were created in collaboration with the retail pharmacy company Oriola-KD. Two stores have opened as plans call for 100 stores to open in the next few years.
Along with the physical stores, the retailer has also launched the online store hehku.fi, offering its selection of almost 10,000 products to over 2,000 pick-up points all over Finland. Kesko plans to open 30 of these stores by the end of 2018.
Aldi Süd is expanding its assortment and now has 1, 500 SKUs in the permanent range.
Coop Italia has launched D’Osa, a 37 SKU range of semi-finished products along with a recipe book featuring dishes that can be made with the products.
Intermarché will add the NutriScore nutrition logo to 1,300 of its private label products.
Système U is offering a 20% discount on 300 private label products as part of its new loyalty programme.
Amazon reports strong sales performances across Germany and the UK, its two largest international markets.
Alibaba, the Chinese online retailer, is introducing its Tmall platform in Russia.
Monoprix is reportedly in talks with Amazon over a partnership that will see Prime Now services offered to its customers in Paris.
Casino is expanding same-day delivery services for its Cdiscount, Franprix and Monoprix stores.
Conad in Italy is introducing an online grocery service offering home delivery from its stores.
The merger of Tesco and Booker has been approved by shareholders.
Spar Austria has reduced sugar in more than 50 of its products.
Costcutter in the UK is introducing almost 2,000 Co-op products and phasing out its Independent range.
E. Leclerc plans to create a network of 200 stores selling only organic products.
Coop Danmark has introduced the Irma Øko banner, featuring mostly organic products, in Copenhagen.
Franprix has opened its first store in Belgium.
K Group in Finland has removed microbeads from its Pirkka cosmetics products.
Axfood in Sweden reports net sales climbed 6% in 2017, but operating profit declined slightly.
Spar Slovenia has launched an online store, offering over 15,500 products for collection or delivery.
Aldi in the UK has launched its largest ever range of pet food and products.
Carrefour Belgium is expanding its Drive grocery collection service.
Ocado, the UK online retailer, posted a 12.7% annual sales growth in 2017.
El Corte Inglés has new packaging for its snack range, featuring graphics with a circus theme.
Tesco Poland has announced that it plans to close 18 stores across the country.
Lidl UK has launched an automated, AI-powered, Facebook Messenger chatbot, which helps customers select the best wine for their meal.
Lidl plans to invest 200m euros in Ireland this year, its largest investment since entering the market in the year 2000.
The UK organic market is now worth 2.2bn pounds, growing by 6% in 2017, according to a new report. The Soil Association’s 2018 Organic Market Report said organic products have been growing for the past six years and now account for 1.5% of the total UK food and drink market.
The report said that, in 2017, sales of organic products in independent retail grew by 9.7% and in home delivery by 9.5%, with almost 30% of all organic sales now taking place online or on the high street. Supermarket sales of organic goods also continued to increase, rising by 4.2% this year, while non-organic sales rose by just over 2%.
Organic products also had the highest value growth, equating to over 20m pounds in sales. Organic chilled foods grew by 21% and accounted for 3.4% of the total UK organic market. Dairy sales also increased by around 3% and retained the highest share of the organic food and drink market, at nearly 29%.
PLMA’s 2018 “World of Private Label” International Trade Show, to be held 29-30 May in Amsterdam, will be bigger than ever. There will be 2,500 exhibiting companies from more than 70 countries on the trade show floor. The total exhibition space at the RAI will be 40,500sqm, a 5% increase over last year. Exhibiting companies include more than 60 national and regional pavilions, with new pavilions from Thailand, Brazil, Peru, Slovakia and Belarus.
A highlight of this year’s event is the keynote seminar presentation by Justin King, who served as CEO of Sainsbury’s for ten years and held senior management positions at Marks & Spencer and Asda. In another seminar presentation, Tom Penninckx, Client Business Partner at The Nielsen Company will examine the latest market share data for private label in Europe.
E-Scanner is a monthly publication of the Private Label Manufacturers Association, Strawinskylaan 1873, 1077 XX Amsterdam, The Netherlands.