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A day after one of the major branded companies in North America made a nearly $7 billion bet on private label, a private label webinar discussed the changing strategy of Aldi to focus less on private label and more on leading brands.
“Global private label: The grocery trends to watch out for in 2013,” was hosted by Planet Retail and Trace One on Wednesday morning, discussing the near future of private label grocery.
Planet Retail Research Director Matthias Queck told the audience that Aldi, the leading global private label grocer by share at 95 percent, had lowered its private label share in 2011 to 91 percent as it began to add leading brands in major categories to its European stores.
Queck said that Aldi was adding leading brands to counter the success of its main competitor, Lidl, to attract more and new shoppers, to increase the average purchase, and to become a one-stop destination.
“The new thing is that the brands will be offered in addition to the private label,” he said. “So in this case, it’s the brands that are the me-too products.”
Queck said that Aldi was facing potential pitfalls with the strategy, suggesting that Aldi had no experience promoting brands, and that the addition of leading brands conflicted with Aldi’s no-gimmicks philosophy and its strict everyday low price philosophy.
But the move toward selectively adding leading brands mirrors similar trends in the dollar store channel, and in drugstores, as each tries to become one-stop destinations.
“You can see that as a similar movement, becoming more of a one-stop shop,” he said. “But for dollar and drugstore, I think it’s about increasing foot traffic and consumer visits, but for Aldi I think it’s about getting more people to come in or to come back from other players who offer these brands.”
Still, Queck said the global leader in private label share is not turning its back on its bread and butter.
“For Aldi, it’s not a change in their set of mind,” he said. “They saw they need some brands to add some traffic. Their heart still beats for private label, I believe.”
However, Queck said that the rethinking of private label philosophies was not limited to Aldi. Other retailers, including global powerhouse Carrefour and Tesco, are considering balancing their private label offerings with their branded programs.
“Exclusivity can also be created with manufacturer brands,” he said. “They can offer advantages such as acceptance in tricky categories, such as health and beauty.”
He cited an exclusive version of Heinz ketchup offered only at Ahold’s Albert Hejin chain in the Netherlands, and Swiss retailer Migros reintroducing a cocoa drink called Banago exclusively in their stores.
“That said, for those that get it right in developing private label, the benefits are still enormous,” he said.
Another main focus of the webinar discussed the role that private label suppliers should take in the future. Although many suppliers believe they want partnership on an eye-to-eye level, Queck said they should strive for more. He referred to it as captainship, with the suppliers becoming a one-stop shop for retailers to gain all their products in a category from that supplier, whether that supplier produces all the product itself or organizes other suppliers through a supply chain.
“Private label suppliers need to liberate themselves,” he said. “They need to transition from being pure suppliers to being full-service providers.
“Category captainship requires a very high level of trust from the retailer. A powerful retailer does not want to surrender that power to a manufacturer. … But we believe there are private label suppliers capable of doing this.”