- Baby Non-Food Products
- Baking/Cooking Staples
- Household Products
- Kitchen Products
- Paper Products
- Personal Care
- Pet Products
- RESEARCH & AWARDS
As any cultural anthropologist worth their salt will tell you, the highly nuanced historical relationship between human societies and their surrounding environments factors greatly into evolutionary progress. In much the same way, the catalysts driving private label retail growth within key retail organizations in various countries around the world has created playing fields with distinctions—and category penetration—not yet seen in the United States. Each of these retailers and countries around the world subsequently sits at different stages of store brand evolution, and each is worthy of study to gain possible inspirations for future U.S. directions.
A Matter of Perspective
“The major difference is really one of corporate commitment and generating the mission of the business to include private label, as a ‘philosophy,’ as part of the company DNA,” said Tom Stephens, founder of Brand Strategy Consultants, Inc. “U.S. retailers generally talk the game, but in many cases don’t walk the game. Of course, there are some great exceptions to this, but if we had more companies with the target of 30–40 percent penetration, and the business processes and in-company resources to get there, we would see a very different future.”
The nature of European geography has led to a smaller handful of retailers dominating their home markets. “Private label enjoys extremely high penetration in many countries in Europe,” said Brian Sharoff, president of PLMA. “Market share by volume is more than 50 percent in Spain, and above 40 percent in Britain, Germany, France and Belgium. The main reason is the domination of each market by a few retail players. As retailers in the United States continue to consolidate and grow, the same penetration is likely to occur here.”
Private label in Europe has commanded formidable market share for decades, so there’s a built-in level of sophistication and efficiency that has withstood the test of time, noted Philip Russo, editor/publisher of Global Retail Brands. “Retailers in Europe tend to treat their private labels as true brands, not simply as less-expensive versions of national brands,” he said. “This is evident in design and packaging, pricing, promotion, and category strategy.”
As a result, the supplier community is quite sophisticated, as well. While low-cost manufacturing is key, it’s not the only attribute suppliers bring to the table; innovation plays a major role, too.
Another big piece of this puzzle is the weighty presence of national brands—and their associated marketing muscle—in the United States through the years. National brands are a much more dominant force historically in the United States than in many other countries, noted Stephens. “But if we want to drive differentiation for our retail business, this has to be the one major contributor to driving customers to one retailer when compared to another. The slavish approach to ‘national brand equivalent’ as the only way forward has to change. Multiple tiers, multiple specialty brands to include cross-store platforms are taking far too long to emerge. Sophistication of marketing beyond the flier is crucial for the future.”
In the absence of national brand dominance, retailers in other countries—most notably Europe—took the branding reigns themselves. “History shows that because the ‘big brands’ never had the domination of the marketplace, it was natural for retailers to want to use their own names on products to drive customer traffic,” said Stephens. “There was also a much higher demand for higher-quality products and the need for weekly shopping, if not every couple of days. Community and local ‘high street’ shopping was always more important in Europe than in North America.” Europe has also been ahead of the game in terms of home delivery of groceries and “click and collect” options, he notes—options that are starting to gain traction in the United States.
Home Field Heroes
“The retailers who are truly interesting in Europe are the ones who have a well-defined retail brand which they leverage to engage their customers,” said Christopher Durham, founder of My Private Brand, and vice president of retail brands for Theory House. “Home improvement retailer Homebase in the United Kingdom, Dutch discount retailer HEMA, Swedish retail icon IKEA and British grocer Waitrose have each developed differentiated private brands that reinforce their unique retail brands. The takeaway is simple: Create a unique and ownable portfolio of private brands. Stop copying and start leading.”
Much of this legwork involves a quest for resonance—seeking tactics, products and lines that have carved unique niches within retail. “Retailers differ significantly from country to country, so one needs to see various approaches to learn something useful,” said Sharoff. “The players worth studying would be Tesco, Waitrose and Sainsbury’s in Britain; Carrefour, Monoprix and Casino in France; Delhaize in Belgium; Albert Heijn in the Netherlands; Mercadona and Eroski in Spain; and ALDI and Lidl in Germany. The global leaders based on size of company and number of countries in which they have stores would be Tesco, Carrefour, ALDI, Delhaize and Ahold.”
Russo would add Rewe (Germany), Edeka (Germany), Migros (Switzerland) and Conad (Italy) to that list, nothing that each excels in a number of categories.
“When I think of Canadian private label, the genius of Loblaw’s President’s Choice is always the first thing that comes to mind,” said Russo. “The notion of providing a better product than the national brands and then extending that concept across an entire retail banner is exactly what I’d love to see more of in the United States.”
Russo suggested that specific countries merit study based on desired retail objectives. “With private label market share in the 50 percent range,” said Russo, “I’d have a close look at the United Kingdom and Switzerland if I wanted to see what I could do to increase customer satisfaction with my retail brand. France and Holland have proven they can succeed beyond their countries’ borders, and Germany can teach a thing or two about hard discount. For innovation in format and product range, Italy excels.”
U.S. retailers who look internationally and have strong translation skills—gaining inspiration, but then logically contextualizing ideas into their lines in wholly new ways—will inevitably find unique methods of growing their private label business.
The Bottom Line
- Cultural store brand integration
- Global private label bright spots
- Select retail brand snapshots
ALDI’s European store brand Gourmet includes products like fig vincotto, an Italian condiment drizzled over salads, meats, cheeses, etc., and pesto sauce made from spinach, cashews and Grana Padano cheese. We have begun to see some high-end ALDI products like these make their way into U.S. stores via ALDI’s Specially Selected line. Expect this approach to continue as ALDI seeks to cultivate appeal for higher-end shopper demographics that see the value in a budget-minded approach, building on the mounting growth in retail at the top and bottom.
Swiss retailer Migros made a significant investment in health-and-wellness with the cultivation and expansion of its Actilife store brand over the years. The products—spanning multiple food categories (including Beverages, Cereal, Dairy and Spreads) and OTC/Healthcare—are demographically dialed down to consumer segments like women, children and seniors, as well as specific areas of health-and-wellness like digestion, muscle and bone health, and cholesterol management. In Switzerland, Actilife is first and foremost a lifestyle brand—one that just happens to be a store brand, as well. A U.S. retailer who can astutely create a strong, holistic, health-and-wellness lifestyle store brand will potentially find alignment with multiple demographics.
Tesco has taken an upscale, artisan tack with the new face of its Finest* store brand, using marketing language like, “Made by passionate people.” The range covers a wide swath of grocery, including wine, beer and spirits. Craft beers in the range include a porter and three types of cider (Somerset, Vintage, Single Variety), and the wines include several vintage products—many with the producer clearly noted. The Finest* line saw a major overhaul in 2013, with highly visible promotion of the store brand line via sponsorship of the popular British drama, “Downton Abbey”—an advertising campaign that spanned television, online and mobile. Select U.S. retailers have begun exploring the possibilities in store branded wine, beer and spirits, products that can gain additional attention when created through partnerships with local and regional craft brewers, winemakers and distillers to develop unique lines exclusive to a given retailer—often without burying that partnership, but clearly proclaiming it on product packaging and in marketing materials.