Industry News / Retailer News / Channels / Discount / News / Grocery

Private Label Suppliers Could Gain Business

July 18, 2013
/ Print / Reprints /
ShareMore
/ Text Size+

Private label manufacturers in the U.S. could have a major opportunity coming their way in the next two years, according to Planet Retail Retail Director Matthias Queck.

Queck told a webinar audience Thursday that the Schwarz Group’s interest in potential expansion of its Lidl discount chain in the U.S. could be a big boon for suppliers.

“Companies that are private label manufacturers looking to build a relationship with one of the top retailers in Europe will have a chance,” Queck said. “Lidl’s system of copy and pasting across a homogenized Europe has proven successful from one country to the next, but will not work in the U.S. This would mean a completely new beginning.”

Queck said a feasibility program initiated for possible U.S. entry should be looked at as the first step in a launch rather than a question of whether the move would be made. The final decision would be made by the end of 2014 or early 2015, he said, meaning a U.S. launch would not begin until 2015.

“The most challenging task would be building up volume,” he said.

Lidl looked at entering the U.S. several years ago but shelved the plan, Queck said. Planet Retail expects Lidl could open as many as 100 stores on the East Coast by the end of 2015, moving into a realm where Aldi and Save-A-Lot are its lone main competition.

“As big U.S. retailers are moving into small store plans, the fight for the best space will pose a major challenge,” he said.

The initial investment is projected to be $650 million, with projected sales of $300 million in 2015, rising to $1.25 billion by the end of 2017.

Queck said it was a surprise that Lidl would be looking on the saturated East Coast rather than the comparatively open West Coast, where dollar store growth is not as heavy and Aldi has yet to open. But the lessons of Fresh and Easy’s failure might be playing a role there, he said.

“Perhaps it’s this lack of familiarity with the concept that caused Lidl to look away,” Queck said. “Allowing it to copy the initial assortment of rivals rather than take the risky move of finding the right product in a regionally diverse market.”

But the Tesco lessons also could sway the way Lidl would enter the market on the East Coast, Queck said.

“They did a lot of market research but they did not test the concept and went into the market much too big,” he said. “They had the overhead costs but the concept didn’t work. Lidl has grown by copycatting what others have done, so why not in the beginning do what others have done? Why not have more or less the same assortment (as Aldi) plus a little on top – more brands, more service, be the Aldi-plus in the U.S. and see what happens.

“The U.S. is such a big huge vast market, there’s enough room for both of them (Aldi and Lidl).”

The success of retailers in the value channel – including hard discounters and dollar stores – means that Lidl is entering a willing shopping environment, Queck said.

“Taking this strategy to the U.S. would put it in direct competition with the world’s leading grocers, including Walmart,” he said. “It will be a difficult task.”

Schwarz Group’s concepts are internationally standardized but flexible enough to cater to special needs in different markets, Queck said. Lidl is first or second in market share in nearly every European market it operates in, but is allowing each of its countries to provide more locally produced items. Countries such as Italy have nearly 70 percent of its SKUs produced in Italy, with Spain and Portugal among those well over 50 percent.

Planet Retail forecasts overall sales growth of 6.2 percent from 2007-2017, with store growth slowing but still advancing 3.8 percent in that decade. Among the growth drivers, Queck said, are the addition of in-store bakeries and the expansion of private label ranges.

Did you enjoy this article? Click here to subscribe to Private Label Buyer.

Recent Articles by Chris Freeman

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

July 2014 New Food Products

This month’s new food products include coffee, energy bars, healthy pizza for kids, specialty sauces, Greek yogurt dip, gelato, puffed grain snacks, snack seasonings, and much more.

Podcasts

Coming with a clear, comprehensive plan was the key to success for Longo Brothers Fruit Markets when the grocer decided to roll out a two-tier private label strategy, Jenny Longo and Robert Koss tell PLBuyer editor Chris Freeman in this podcast.

More Podcasts

Private Label Buyer Magazine

PLB July 2014 cover

July 2014

The July 2014 issue of Private Label Buyer includes articles on changing retail dynamics as well as category insights on store brand cosmetics and paper products. Check it out today!

Table Of Contents Subscribe

Innovation

Which private label category is currently seeing the most innovation?
View Results Poll Archive

Clear Seas Research

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications,Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.

PLB Marketplace

STAY CONNECTED

facebook_40px twitter_40px  youtube_40pxlinkedin_40pxgoogle+ icon 40px