Private Label Buyer

Looking to the Far East

March 29, 2012
The development of private label foods and grocery items is still very much a work in progress across Asia.


Private label is expanding in Asian markets; that means new opportunities for creative private label suppliers and retailers

The development of private label foods and grocery items is still very much a work in progress across Asia.
“Private label is nowhere near as developed in Asia as it is in the rest of the world,” explains Robert Gregory, research director for the London-based research firm Planet Retail. “The big names right now are Tesco, Carrefour and Walmart. When private label retailers first came to Asia in the ‘90s, there wasn’t any real private label to speak of; that has changed in the past 20 years.”
In addition to the multi-national retailers Gregory mentions, Asia has its own retail powerhouses. The Beijing Hualian Group, for example, is one of the largest retailers in China with supermarkets, department stores and its own private label products bearing the retailer’s name.
Another competitor is Lotus, owned by United Kingdom-based retailer Tesco. Established in 2004, the company currently operates 40 stores throughout China and Thailand. Lotus sells food as well as home furnishings and electronic equipment.
Lianhua Supermarket Holdings Co. Ltd. is a retailer with 3,600 stores in 20 provinces throughout China. The retail chain operates hypermarkets, supermarkets and convenience stores.
Big grocers are expanding at a rapid rate and overall private labels are growing, explains Gregory. “The trouble is that there is a lack of experience in the Asian markets and each province and country has its own customs, cost of living and, in some cases, its own language,” he says. Most retailers are expanding at a rate of 2-3 percent per year throughout the continent, according to Gregory.
THE PL LANDSCAPE
Tesco and Walmart are the largest players across Asia.
Walmart has outlets in both China and Japan. As of July 31, the retailer has 757 locations across the continent, according to information on the company’s Web site. Walmart began its retail operations in China in 1996, with the introduction of a supercenter and Sam’s Club in Shenzhen. In February 2007, the company purchased a 35 percent interest in the retail banner Trust-Mart.
Despite this, Tesco is the powerhouse in Asia. “Tesco has a much greater position in Asia, they have been around longer than Walmart and have more locations throughout the continent,” explains Gregory.
VARIED PENETRATION
Private label penetration rates vary significantly across the Asian continent.
“Private label has a much lower share of supermarket sales, ranging from less than 1 percent in Indonesia, 1.5 to 30 percent in Thailand, Malaysia, Korea, Singapore and Taiwan, and approximately 6 percent in Hong Kong. In all these countries, private label is increasing,” says Stuart K. Westmore, partner at the London-based consulting firm L.E.K. Consulting.
“Cultural preferences mean that certain categories do better in Asia than in others,” says Gregory. “Rice and noodles are both shelf-stable products throughout all of the Asian provinces. Asian consumers value freshness, which is why the street markets are a big competitor for the retail stores. Fresh produce must be made attractive in the retail markets otherwise Asian consumers won’t buy them.”


Private label in Australia

Convenience stores and discount supermarket chains like Kmart are the leading players in private label retailing in Australia, according to Stuart K. Westmore, a partner at the London-based consulting firm L.E.K. Consulting. “In supermarkets, private label overall is estimated to represent approximately 14 percent of sales in Australia,” explains Westmore.
“Penetration varies by category in supermarkets, with the highest penetration in dairy at approximately 20 percent, chilled products at approximately 30 percent and frozen products at approximately 16 percent. In many of these categories, the product is mature and brand is often less important than price in the customer’s eyes.  Penetration is lowest in confectionery, ice cream, bakery and soft drinks where innovation and brand development remain critical factors in winning share and private label producers do not have the capabilities to compete with the likes of Coca-Cola, Pepsi, Mars and other large multi-category, multi-national branded goods companies,” he says.
“The private label market is not as advanced in Australia as it is in markets in Western Europe, for example, and there is still much potential for further development and expansion. As a result, all of the major players have spent the last five years developing and adjusting their own label ranges to the taste of the Australian consumer,” explains Gregory.


Asia at-a-glance

MAJOR RETAILERS
Tesco
Walmart
Sam’s Club
Lotus (Tesco)
Carrefour
Beijing Hualian Group
Lianhua Supermarket Holdings Co. Ltd.
 
PL PENETRATION RATES
Varies per country. Averages about 6 percent across the continent.
 
WHAT’S AHEAD?
Expanded PL
Supplier expansion