CEE Private Label Trends


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As the world struggles to free itself from global recession, the one silver lining in an otherwise grim scenario is the expected growth of private label brands. Indeed, the continued growth of private labels remains one of the major macro trends affecting FMCG (and other) sectors.

In this short round up, Cocoon Group summarizes a few of the trends driving and affecting private label brands - with a particular focus on opportunities for (Central and Eastern) Europe.

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CEE Private Label Trends

  1. 1. November 2011 KNOWLEDGECEE Private LabelTrends and opportunities See further, deliver more
  2. 2. IntroductionAs the world struggles to free itself from global recession, the one silverlining in an otherwise grim scenario is the expected growth of privatelabel brands. Indeed, the continued growth of private labels remains oneof the major macro trends affecting FMCG (and other) sectors.In this short round up, Cocoon Group summarizes a few of the trendsdriving and affecting private label brands - with a particular focus onopportunities for (Central and Eastern) Europe.
  3. 3. 10 Opportunities and trendsOpportunities TrendsOur report begins with a round up of six In addition to the 6 PL growthmajor opportunities for retailers to grow opportunities, we’ve spotted these 4their private label portfolio, listed other trends which are affectingaccording to accessibility. retailers around the world and around Europe.While ranking these opportunities, wetake into account the cost of entry,consumer trends, retailer credibility, andinherent barriers to entry.1 Value 7 Collaboration2 Buy Local 8 Leaving home3 Bio/Organic 9 Design4 Premium 10 Foreign leadership5 Niche and Specialty6 The Muddled Middle
  4. 4. _Opportunities 1. Value Value for money remains the strongest driver of private label consumption, as well as the easiest entry-level opportunity for retailers to launch a private label brand.   Value has traditionally been synonymous with cheap- but there are other ways to build a value for money brand, especially since research shows that consumers are less inclined to give up quality (unless forced to). Family sizes and bulk formats can all be used to create a value proposition that will appeal to the consumers’ desire to save money without giving up on the quality they have become accustomed to.
  5. 5. _OpportunitiesIn Poland, Tesco has taken advantage of the economic uncertaintyto launch 700 value products, putting pressure on more expensiveindependent markets and less convenient discounters.
  6. 6. _Opportunities 2. Buy Local One micro-trend prevalent in the environmental movement is Buy Local. Attractive to consumers as both a way to cut down on carbon emissions as well as supporting local small businesses and farmers, the Buy Local movement makes great sense for retailers who wish to take on a more active role of supporting the community, the environment, or both.
  7. 7. _OpportunitiesA retailer’s inherent expertise in sourcingproducts and the feet on the ground aspect ofthe retail business provides relevant credibilityfor the launch of any locally-focused brandproposition.
  8. 8. _OpportunitiesOther factors that positively impact theBuy Local trend are health scares andpolitics. The E.coli scare from the recent‘cucumber scandal’ has prompted a rise indemand for local vegetables throughoutEurope, including 34% in Latvia. In thesecases, the demand for local produce faroutweighs supply.
  9. 9. _Opportunities 3. Bio/Organic Another fast growing sector that straddles the environment, health, and wellness macro trend is Organic and Bio. Many retailers are taking advantage of the fact that this new trend is under-represented by manufacturer brands, and that the playing field is basically even in terms of credibility. This has allowed retailers to use the retail environment to really promote these brands as healthy, environmentally friendly alternatives to leading manufacturer brands.
  10. 10. _OpportunitiesThe global market for organic products is expected to grow by 8% by theend of 2011. This is up from 4.7% one year ago.
  11. 11. _Opportunities 4. Premium Premium private label brands are expected to be one of the major sources of private label growth in the coming few years. This growth mainly comes from consumers who have grown to trust retailer value brands when money is tight. When this kind of relationship exists between the retailer and consumer, the retailer can use a premium PL proposition to retain those consumers when they start looking to upscale.
  12. 12. _OpportunitiesTo launch a premium brand successfully, a retailer must already have agreat deal of credibility with consumers, either in the form of highshopper loyalty or experience with other PL brands.
  13. 13. _Opportunities5. Nicheand SpecialtyWhile the previous four chapters represent thegreatest opportunities for overall PL growth, there areindividual categories where retailers can competewith their own PL offering. In sectors that have littlecompetition, with few or no well-established brands,retailers can easily step in as the value alternative oreven as the front-runner. Horeca, dietary, vitamins/food supplements, and other niche areas are fertileground for forward-thinking retailers.
  14. 14. _Opportunities6. The MuddledMiddle Trying to launch a brand without significant price point advantages in well-developed, saturated sectors is going to prove the most difficult for retailers. This middle ground is fast disappearing, and even manufacturer brands are finding it difficult to survive. Any brands that wish to compete here will need to draw upon vast stores of consumer goodwill, product innovation, and outstanding design (not to mention more than a bit of luck) to survive.
  15. 15. _Trends 7. Collaboration Retailers seeking to streamline are finding success collaborating with each other rather than competing. In this way, retailers can utilize their expertise or resources while providing new markets or channels for their partners. The collaboration between Carrefour and Boots in the UK is a prime example of erstwhile competitors creating win-win situations out of cooperation.   Carrefour carries Boots’ branded products, while the Boots manufacturing subsidiary creates health and beauty products under the Carrefour brand. Boots benefits from Carrefours extensive global footprint, while Carrefour gets Boots expertise in helping to create a name for itself within the health and beauty sectors.
  16. 16. _Trends German discounter Metro (owner of Makro cash n carry stores) has worked out a collaboration deal with French retailer Auchen to improve the reach of both brands products. Metro will gain access to Auchens private label supply network, while Auchen will benefit from exposure to Metros small business owners.
  17. 17. _Trends 8. Leaving home In some exceptional cases where a private label brand has a particularly strong proposition (either in association with the retail brand, or not), we really see them coming to life as they are sought after and offered in different retail channels. Sainsbury’s SO Organic in the UK and the Martha Stewart brand in the USA are two such success stories. As retailers continue to collaborate (see above), we should expect to see more and more private label brands grow out of their own stores and onto the shelves of other retail chains.
  18. 18. _Trends 9. Design Design remains one of the primary tools for communicating private label brands. In many cases, packaging design is the only way that consumers can be made aware of a private label proposition. As a result, private label pack design is becoming increasingly strategic, i.e. drawing from the same advanced techniques as their A-brand counterparts. A successful private label no longer necessarily means simplistic 2-color design and cheap production material!
  19. 19. _Trends 10. Foreign leadership The acceptance of private label brands is driven by exposure and loyalty to retailers. Since most private label initiatives in CEE come from foreign retailers, it is logical that consumers in countries with the most penetration from foreign retailers would be the first to try new private label brands. While recent economic activity has added an element of uncertainty to any near-term predictions, we can expect a spike in private label activity in Poland and Ukraine as they are inundated with western Europeans traveling to those countries for the upcoming 2012 UEFA World Cup. These consumers will be looking for familiar environments and familiar brands to stock up on food and other supplies.
  20. 20. _TrendsSeveral major western retailers have cited Romania as an importantmarket for future growth. This is due in large part to the countrysexpected fast economic recovery. Discounters, whose business modelsare based on private label products, are heavily prevalent in Romania.
  21. 21. Thank you for your attention!For more information, please contact:Cocoon GroupDouglas Kaufmand.kaufman@cg-eu.com00420 603 840 287U Pruhonu 13, Prague, Czech Republic 170 00www.cg-eu.com
  22. 22. v  Image sourcesSlide 1, 2: http://aislingmccoy.com/2011/05/andreasgursky/Slide 4: http://blogblongdring.blogspot.com/2011_05_01_archive.htmlSlide 5: http://www.panoramio.com/photo/23319799Slide 6: http://www.strefabiznesu.gp24.pl/artykul/w-tesco-teraz-po-polsku-13710.htmlSlide 7: http://www.mommybrainreports.com/wp-content/uploads/2010/11/localGrown.jpgSlide 9: http://popsop.ru/19689Slide 10: http://www.coop.ch/pb/site/common/get/documents/system/elements/ueber/medien/_img/_naturaplan/verde/naturaplan_20080908_produkte.jpgSlide 11: http://popsop.ru/wp-content/uploads/waitrose-herbs_award_winning_lm.jpgSlide 12: http://www.thedieline.com/blog/2009/6/1/tesco-premium-ice-cream.htmlSlide 13: http://laurakristinexo.blogspot.com/2010/06/june-faves.htmlSlide 14: http://wafabeauty.blogspot.com/Slide 15: http://realbeautyreporter.com/wp-content/uploads/2009/07/boots_sensitive-skin.jpgSlide 16: http://www.fis.com/fis/worldnews/images/29383_350x265_72_DPI_0.jpgSlide 17: http://www.freshplaza.com/2007/0601/amcor.jpgSlide 18: http://mypbrand.com/2009/09/17/cold-beer-great-design-private-brand/Slide 19: http://bolapagi.com/hasil-lengkap-kualifikasi-euro-2012-dan-kualifikasi-piala-dunia-11-12-oktober-2011/Slide 20: http://www.flickr.com/photos/mfoord/4939637816/Additional images provided by Shutterstock. © Cocoon Group 2011 All Rights Reserved