Private Label Buyer

South of the border

March 29, 2012
Ask the experts about the state of private label in Latin America and what you’ll hear will sound much like what you might have heard in the United States 30 years ago.


Private label has a lot of growing to do across Latin America, and that spells opportunities for savvy suppliers

Ask the experts about the state of private label in Latin America and what you’ll hear will sound much like what you might have heard in the United States 30 years ago.
“I think that retailers are still trying to get the basics right,” says Daniel Bregman, senior director, Latin America, with Daymon Worldwide.
That spells opportunities for private label suppliers who want to expand south of the border. “The key point to remember is that there are currently more opportunities to supply products to Latin American retailers,” says Carlos Hernandez, retail analyst for research firm Planet Retail.
While mom and pop local grocery stores are still common and/or dominant in certain Latin American countries, larger local and international food retailers are making significant inroads, and with them are coming private label offerings.
Cencosud S.A., for example, maintains a 30 percent market share in Argentina and 28 percent in its native Chile, says Cristian Gutierrez Maurer, corporate private label manager, with Cencosud. Its market share in Peru is 50 percent, he says. Major competitors include Walmart with what he puts at a 33 percent market share in Argentina, Brazil and Chile, and France’s Carrefour with a 30 percent market share in Argentina. Another major player in the region is French retailer Casino, which operates in Columbia, Argentina and Uruguay, and has a 40 percent share in Brazil, estimates Bregman. Spain’s Makro S.A. operates in Columbia, Brazil, Argentina, Peru and Venezuela, he adds.
“I would not say that traditional stores dominate any of the main markets anymore,” explains Hernandez, “although their weight is still very considerable. There is an obvious trend toward the development of the modern retail sector in all the region and retailers are increasingly using private labels as a means of offering attractively priced products, more product variety and also as a way of strengthening their brands in cases where the private label products bear the name of the retailers.”
LOW PENETRATION
Private label penetration rates are primarily in the single digits across the region, although Cencosud’s Gutierrez Maurer says penetration has reached 11 percent in Chile. PL penetration in Brazil and Argentina hovers around the 8 percent level.
Latin America has not experienced the economic upheaval plaguing the States these days, experts agree. That means simply trying to sell private label based on low cost to cash-strapped consumers isn’t necessarily a formula for success there.
“The [private label] consumer motivation in Latin America is a bit different than the [States]. Middle and low income consumers do not look at [private label] as a way to save money. They consider it a risky proposition when spending their limited income. Therefore, categories that do well tend to be low risk and low profile on the table so that the mid- and low-income consumers will also buy,” says Bregman.
THE PL LANDSCAPE
Carrefour is doing well in Brazil with private label baby and pet products, says Bregman. Walmart offers Great Value in what Planet Retail’s Hernandez characterizes as the economy range, but it also offers local value priced private labels “such as +eKonomico in Brazil and aCuenta in Chile, which are positioned below Great Value in price,” he says.
Walmart also is cross-pollinating its Latin American stores with its private labels from countries other than the United States. “Walmart has had an impact on all markets it has entered in the region, particularly in those where it leads the market, such as Mexico, where Walmart has driven prices down and forced competitors to follow suit. The company has rolled out some of its U.S. private ranges such as Great Value and Equate, bringing also other private labels from its U.K. operation Asda, such as George and Extra Special,” Hernandez says.
Cencosud, which offers the Jumbo PL line among others, has set a goal of tripling its private label sales by 2015, says Gutierrez Maurer. Its set up a group run by veterans of Procter & Gamble, Unilever, Nestle and L’Oreal to oversee changes in its private label packaging while developing new market plans to strengthen its private label shelf presence by tripling the pace of its new product introductions, he says. In addition, “over the last two years, the private label teams at country level have tripled,” he adds. “We strongly believe that Cencosud will lead PL development in terms of brand building, innovations and development of value-added products in the region,” Gutierrez Maurer says.


Latin America at-a-glance

MAJOR RETAILERS
Cencosud
Carrefour
Casino
Marko S.A.
Walmart
 
PL PENETRATION RATES
Roughly 8 percent in larger countries
 
WHAT’S AHEAD?
More PL rollouts
Supplier opportunities