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Private label adoption in Europe has outpaced the United States for decades. And some of the biggest players in its business are familiar names across the pond, such as Tesco, Carrefour, and Marks and Spencer.
A presentation this week at the 2013 IRI Summit in Las Vegas brought a new name into the mix, though, and one that retailers in Europe and abroad should be paying attention to – Mercadona.
The Spanish retailer now claims a 23 percent share of the country’s grocery market, SymphonyIRI Retail Development Europe’s Pascal Bucalo said. This despite the fact the retailer only has been around for 30 years.
“So this is not re-tail, but re-volution,” he said. “It’s a new age. There’s a fight for the market on the battlefield.”
Mercadona has committed its retail practice to private label, he said, and four years ago cut 1,000 items out of its stores to bring prices down and help Spaniards afford their products in the depth of the recession.
“Frozen foods, private label dollar share is up to 61.5 percent in Spain, because of Mercadona,” he said.
Bucalo cited the progress made by Senoble, a French maker of yogurt, because of Mercadona. As the retailer re-shuffled its supplier relationships in the past few years, it looked to sign long-term agreements with players in its supply chain to form partnerships, not simply transactional relationships.
“Senoble is a small player in France, but now it’s second in the Spanish yogurt market, because of its relationship with Mercadona,” he said.
Data shown through research and surveys showed plenty of insights. For example, a study of 100 grocery categories across French retailers showed private label shares ranging from as high as 73 percent in a category to as low as 5 percent. And price differential between private label and national brands was not a factor in all of those categories, he said.
“You cannot say private label in general. Each retailer has its own strategy,” Bucalo said.
Another survey found that shoppers were as likely to stay with retailers because of their private label products as they were to shop at other retailers because of their prices and promotions.
“Then it is as important for a retailer to retain its own customers with store brands than it is to attract other shoppers with lower prices and promotions,” he said.
The approach for retailers in private label was important, as well, Bucalo said.
“Everyday low price is the job of white label private brands, while high-low (pricing) is the job of national brands. This is what retailers are thinking,” Bucalo said. “But not only does (private label) have to be treated like a brand, it needs specific know-how. It has to be faster. It has to be simpler. It has to be stronger.”
He said forecasts have shown private label share in Europe growing from 22 percent unit share in 1992 to 45 percent today and 50 percent or more by 2022, while the U.S. could grow from 17 percent today to 30 percent or 35 percent by 2022.
To get there, Bucalo had recommendations for suppliers and retailers.
“For retailers, you should market your private label from a me-too strategy to a this-is-me strategy, because this is your relationship with your shoppers, your suppliers, and your community,” he said. “For manufacturers, of course, private label can be a threat and an opportunity. You have to consider each private label as a different competitor or contributor to your business. Rejuvenate your mainstream lines to be competitive. Be very selective in true innovations, as retailers are. And if you decide to supply private label, you should not only go with procurement and cost of goods, but to share your market insights.”
He added that a small group of retailers such as Intermarche are beginning to market their private label products out of their own banners and in other channels, exportation, and online. This, he said, is just the tip of the iceberg.
“People are thinking outside of the box, and I assure you, that will not be the exception to the rule,” he said.