Private Label Buyer

Europe's Finest

MMM, Selection, Gourmet, Exclusive, Select, Quality, Finest, Luxury, Excellent — new and improved premium private label brands (and products) are filling up supermarket shelves across Europe. Not long after the credit crunch, it was economy private label products that prospered, but now it is time for the top end of the market to flourish.

“In such a vibrant marketplace, in which new shopper loyalties are emerging, retailers and food manufacturers are responding very rapidly to the challenges presented by the recession,” said Joanne Denney-Finch, chief executive of IGD, a UK research firm covering the food and grocery industry worldwide. “They are each vying to excel at delivering value — and the most effective are reaping the rewards.”

Trading up to premium products, of course, means higher margins. Terry Leahy, CEO of UK retailer Tesco, basking in the glow of his Christmas takings, revealed that a quarter of all festive season shopping baskets contained a product under the retailer’s Finest premium brand.

Edward Garner of UK market research firm Kanter Worldpanel (previously TNS Worldpanel) confirmed that such “green shoots” were not just a figment of Leahy’s imagination. Other retailers were prospering, with many showing good sales of premium private labels, suggesting an end to recessionary buying behavior.

When the supermarket executives hear about the launch of a new premium private label range, they start asking questions. How good is it? Is the packaging revolutionary? Will it extend the retailer’s brand? Is it good enough to beat the national brands? Is it good enough to suck in new customers and grow market share? Is it, supermarket executives ask nervously, better than ours?

This, then, is a very interesting time in the European world of private label. As the worst of the recession becomes an unwelcome part of our shared history, there are signs consumers are opening their purses a little wider and trading up to higher-quality options. And supermarket chains are very keen to boost their sales of premium private labels.

Brands such as Auchan’s MMM (France) and Migros’ Selection (Switzerland) are wowing critics. Launched last autumn, REWE’s Feine Welt (Germany) looks fabulous on the shelf.

The logic of building a ”good, better and best” hierarchy of private label is clear: Lure shoppers into the store with the lower price points, then encourage them to trade up to standard and premium private labels.

Justin King, Sainsbury’s CEO, said the UK retailer’s Taste the Difference range remains an important part of its product offerings.

“In particular, Taste the Difference ready meals are fulfilling a trend towards customers treating themselves at home rather than eating out or buying more-expensive takeaways to eat at home,” he said.

Bad news for restaurant owners has been a boon to purveyors of premium private label. Meike ter Braak, brand and marketing manager for private label at Albert Heijn (an Ahold banner) said the AH Excellent brand, which is pitched above the standard Huismark brand, is faring very well.

“We have seen some general trading down in the current economic climate,” she said. “On the other hand, with fewer people eating out, that means they may prefer to buy an Excellent product to recreate that ‘eating out’ feeling.”


Fair Trade and Organics
The number of fair trade private label products also is on the increase. It is a sign of the rising expectations of fair trade that a 12 percent rise in sales in the UK last year was considered disappointing. But then the 40 percent rise in 2008 was an amazing performance.

In 2008, for example, the UK-based Co-operative Group became the first retailer to convert its entire own-brand hot drinks category (tea, coffee and hot chocolate) to fair trade. Now the company is adding the recently acquired Somerfield chain to its portfolio of banners. Somerfield already stocks an entire range of branded and own-brand products, including an extensive fair trade grocery selection, which covers everything from chocolate to fruit and nuts, cereals, hot and cold drinks, cakes and wine.

“We will continue to add more fair trade lines to our entire 3,000-store network, as well as to develop more fair trade products and market opportunities for growers in developing countries,” declared Co-operative Group CEO Peter Marks.

Similarly, sales of organic private labels have stood up well.

“Despite the recession, the organic label products are in high demand, despite the fact that they are 30 to 40 percent more expensive than conventional products,” said Monika Weibel, a spokesperson for Migros. “In our annual customer survey, we found that many customers want an enlargement of the choice of organic food — a demand we intend to meet.”

Of course, the commitment to selling more fair trade and organic private label is partly about ethics, but it also comes down to good old supply and demand. Consumers are increasingly likely to reach for fair trade and organic products on the shelf. It boils down to added choice.

Ben Webb is deputy editor of European Supermarket Magazine (formerly Private Label Europe magazine). He can be reached at ben@esmmagazine.com.