Cover Producer-Retailer relationships of value: from category to PL

Producer-Retailer relationships of value: from Category to PLd

Growing turnover and industry size on the one hand, but competition and an approach overly single-client focused on the other, divide co-packers into those in favor and those against. The solution lies in cooperation.

Guiding and stimulating partner companies, cooperation encourages strong industrial and competitive dynamics, the adoption of best practices of social responsibility and the construction of an increasingly sustainable and circular industrial fabric. Private labels are now seen as an even more strategic asset for the development of a new model of society. However, many producers are still wondering whether entering into a partnership with a PL may damage their image and business. The study published last March by The European House-Ambrosetti, ‘From emergency to sustainable relaunch: the PL contribution’, dispelled any doubts. One of the paragraphs, in fact, was specifically dedicated to the value generated by private labels throughout the industry. According to Ambrosetti, PL's contribution to the industry over the years has been a guide and stimulus to partner companies that has strengthened their competitive industry dynamics. It was later shown that it had been the main factor in the growth of the Italian food industry. Its incidence on the total turnover of the industry was equal to 8%, a historic record. This percentage, never reached before, according to Ambrosetti explains the 78% growth of

the food industry in the domestic market in the last 17 years. Furthermore, PLs are currently generating work for a total of 235,000 among direct and indirect employees along the entire supply chain, up 7% compared to the previous year. It involves, in fact, a network of about 1,500 partner companies (those that used to be copackers), 92% of which are Italian. Of these, 85% are small and medium-sized companies with a turnover of between 2 and 50 million euros.

STRONG BUSINESS RELATIONSHIPS FOR ABOUT 50% OF THE COMPANIES

And that’s not all. PLs’ business supply chain is based on long-term strategic collaborations: in 98% of the cases, supply relationships last for over 2 years, and about 50% of partner companies now have a supply contract with Modern Retail for 8 years or more. The analysis of the financial reports of a sample of 565 companies throughout Italy showed that PLs help strengthening the business and competitive dynamics of partner companies, supporting the growth of their turnover and added value over the years (7.3% annual average growth rate of low-performing PL partners, 6.8% growth of high-performing PL partnera and 17.2% growth of very high-performing PL partners), as well as the growth of their EBITDA (7.6% annual average growth rate of low-performing PL partners, 9.4% growth of PL partners and 16.9% of very high-performing PL partners) and employment rate (4.3% annual average growth rate of low-performing PL partners, 5.4% growth of high-performing PL partners and 11.8% of high-performing PL partners).

Natural quality for your brand: trust the Leader

La Doria is the leading European producer of private label legumes, peeled tomatoes, chopped tomatoes, pasta sauces and pestos and among the top Italian fruit juice producers.

Product quality and customer centricity, respect for the environment, traceability from farm to shelf, technological innovation and great flexibility have led us to become the preferred supplier of the major retailers looking for an alternative to branded products with an excellent quality/price ratio.

A passion for private labels since 1954.

A growing local turnover thanks to ʻI nostri Oriʼ by Conad Nord Ovest

u With the aim to enhance and support local businesses, Conad Nord Ovest launched ‘I nostri Ori’, a product range that brings together, under the same brand, all the food specialties of the regions where the label is present. ‘We’ve always been committed to supporting local businesses, which are mainly small and medium producers. In 2020, the local partnership network included 1,775 suppliers, for a turnover of 570 million euros’, affirms Marco Antonio Brambilla, Conad Nord Ovest Business Manager. To ensure its product supply, Conad Nord Ovest oversees the entire production chains, by collaborating with the suppliers and reaffirming its position against labor exploitation, also through careful inspections. “The new brand strengthens and enhances ‘Consorzi Ori’ even more. These are organisations of fruit and vegetable growers created in 2010 out of Conad Nord Ovest’s idea”, explains Alessandro Bacciotti, Conad Nord Ovest Sales Manager. Up to date, the Consortia has 121 member companies. The sales share of fruit and vegetables sold under Ori brand in Tuscany, Lazio and Sardinia in 2020, for instance, accounted for over 20% of the total turnover generated by fruit and vegetables. ‘I nostri Ori’ project is part of the ‘Sosteniamo il futuro’ initiative, a series of concrete, daily actions based on participation, inclusion and economic, social and environmental sustainability.

Specifically, PLs are given credit for supporting a network of companies in the South of Italy that is increasing at a more significant rate compared to the national average (+6.37% vs +5.35%). Also, small enterprises are growing faster than those of the food industry (+8.48% vs +5.32%). Finally, PL partners that collaborate the most with Modern Retail proved to be more resilient during the COVID-19 pandemic and are expected to be among those players in the Italian agri-food chain that will emerge “stronger” from the crisis.

COPACKERS BETWEEN HIGHS AND LOWS

There are risks, though. In its 2018 study, entitled ‘The producer’s dilemma: Company Brand or Co-packing strategy for Private Labels’, IPLC consulting firm identified risks mainly in: the high turnover concentration for small and medium enterprises in relation to large-scale

distribution customers; the risk of product substitutability in terms of efficiency and quality; the continuous competition with other co-packers for the same PL customer; the need for regular investments in new and more efficient plants, and finally in the optimization of production capacity. “As in any other sector, since the market is constantly changing, the economic exposure towards a customer is always a mystery - remarks Sergio Antoniuzzi, Icefor President - therefore major companies may easily be unable to keep up with it anymore. Over time, our certifications and knowhow have given us the opportunity to enter into PL partnerships with the most important clients of large-scale distribution and many others.” Innovation is key for long partnerships. Plant-based, non-polluting and cruelty-free detergents, Rspo-Roundtable on Sustainable Palm Oil-certified, ingredients from non-human food sources, as well as, Voc-free formulae, and ‘Plastic Second Life’-certified packagings are only a small yet significant part of what makes this detergent company a reliable and valuable partner.

N&V, STRATEGIC ADVANTAGES FOR CONSORZIO C3 PARTNERS

u “N&V products have always been good value for money in almost all categories” - says Alessandro Cassano, Noi&Voi Operational Manager, the exclusive brand owned by Consorzio C3. “The strategic advantages - he adds - are the possibilities to strengthen our business relationships, considering that almost all our co-packers (leaders in PL development) are also historic partners of the other members. Logistics companies, for instance, are a classic and clear example.” The consortium also provides its partners with support for the graphic development of their packaging, from design to sending the graphics for packaging printing.

Esselunga, over 8 billion turnover for the industry

u “The attention to the territory and the excellence of its products and typical dishes, as well as the promotion of a short supply are essential for Esselunga’s procurement policies. Buying locally helps support the economic fabric and its small farms, a priceless resource for Italy, and contributes to preserving the Italian agricultural heritage.” In its last Sustainability Report, the chain estimated this value at over 8 billion euros in turnover, with 301 million euros in investments in the industrial segment, and 6.6 billion euros of purchases from Italian suppliers. In 2020, the company purchased goods and services from over 2,650 small and medium enterprises for a total value of about 2.2 billion euros (29% of total purchases from Italian suppliers).

Gruppo VéGé, an all-around partner

u According to VéGé, a leading company in large-scale distribution, the first step towards a strong relationship with shareholders is the partnership with PLs. “Since we’re a large group scattered throughout the country, in addition to a business relationship with our brand and the possibility to develop products that, due to their volume or characteristics, can’t be part of the usual assortment - says Marco Pozzali, Gruppo VéGé PL Coordinator -, a PL producer, establishing a relationship with the headquarter, has the great advantage of getting known and embraced by all the businesses of the group.” Furthermore, if such supply, complimentary to PLs, were wide, a further step would be the signing of an agreement with the Group’s headquarter, which would regulate the general economic terms of the relationship between the supplier and the businesses. Such aspect would give them further visibility and ensure a basis on which to build single “local” relationships. “Together with these “business” advantages - continues Pozzali - the collaboration with VéGé allowed several among our co-packers, including small and medium enterprises, to have a deeper knowledge of how to approach market or product analysis, packaging design and certification, as well as pricing process. Those suppliers with a less structured business, as they are exclusively focused on production, for instance, saw such relationships as an opportunity to grow in those areas that aren’t usually part of their business reality”. VéGé group, in fact, offers significant support to their partners, providing, in particular, a thorough analysis and sharing of market data, which it receives real time, used to better understand the playing field of PL. “Also the in-depth analysis of product characteristics, compared to the other market players - concludes Mr. Pozzali - is an opportunity for co-packers to get in the game, supported by the expertise of our Quality Assurance department, which continues with recurring laboratory analysis that allows the understanding of any production deviation from the target set. Packaging development, especially for the continuous changes in the related regulations, is undoubtedly a complex phase. Our legal department shares any implementation and interpretation with suppliers, and this often becomes an opportunity for mutual update.”

Moroni Amato Group

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Sustainability, Innovation and Market vision are three principal points of our company for the development of our Brands and those of MDD.

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ZERO IMPACT: the green line with 100% recycled packaging and over 94% ingredients of natural origin. quality products, innovation and love for the PLANET.

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COCCOLATEVI: laundry perfumers with an heady and lasting fragrance that can also be used to perfume and cleanse the whole house.

BIOXCARE: a complete range of products dedicated to skin hygiene and disinfection. Practical and e ective sanitizing soaps and gels for the whole family.

INNOVATION IS KEY TO COLLABORATION

“PL production contributed to business growth thanks to the increasing market share of PL products, on the one hand, and the growing number of distributors that see Moroni Amato Group as an attentive and reliable partner”- explains Tomas Beggio, Moroni Group Sales Manager. The company has developed several PL lines that have performed outstandingly in terms of sales. “The best way for us is a good balance between branded products, whose success depends completely on the producer, and PL products”, says Mr. Beggio. Active in seafood ready meals since 1861, Medusa company has been working with PLs for years. “The advantage of producing PL products for a company like ours - says Sabrina Pertot, Cesare Regnoli&Figlio (Medusa) Marketing Manager- lies in the possibility to establish business relationships with large-scale distribution that grow stronger over the years. PLs have dedicated a place on the shelf, but, most of all, can count on the trust of loyal customers. The main risk is market competition, as those categories that don’t have a structured assortment are less performing, thus having fewer chances to compete with their own brand.” If research and development and communication investments were focused solely on their own brand, in fact, this would consolidate brand equity, but would leave the way open for other competitors to build their private brand. “Only true collaboration - concludes Stefano Ghetti, IPLC Italy Partner - can dispel this doubt: those who are open to discussion with retailers reach the consumer first because they can benefit from their direct experience on the part of the brands and can discuss issues that help them in the creation of the product.” Maria Teresa Manuelli