PL Magazine September 2022

Creativity, sophistication and good taste have made Italian Style famous in the world of fashion. Italian designers excel for their obsessive attention to detail, their flair, their ability to pair things together perfectly to create iconic items, and their choice of the best craftsmen to produce them. This is the model that the brand “La Rosa dei gusti” has adopted in the food sector to provide consumers with unique and distinctive flavour experiences via a carefully planned approach. You’ll find love, passion and knowledge in our products: we love inventing and discovering different flavours every day so that we can make your mealtimes pleasurable and happy. Accessible to everyone, every day.

2830

3 Editorial

Inflation bites, consumers

16 Interview with distribution

Metro, wholesale and private label, a special marriage

20 34

30 Interview with the company

Bia: CousCous is becoming increasingly popular, even beyond the borders of the Mediterranean

4 ANALYSIS

PL: through thick... and less thick

6 Cover story

The right move. Positioning strategies and prices of European PL in the fight against inflation

PLMagazine

Bimestrial

Editor-in-chief

Editorial director

Translation

There

20 The private label scenario

Private Labels: option or need?

34 Markets

Pasta and rice of PLs down, well done the fresh and ready-to-eat segments!

28 On-the-field experiences

Fair Trade, PLs and fairtrade union grows

Scientific Committee

Stefano

40 QBerg observatory

The assortment of Main Courses grows

Creative Director

Contact

Advertising

Contributing Authors

Inflation bites, consumers curb purchases and distributors take immediate action

Skyrocketing inflation, increasing consumer shopping polarization, and a slowdown in the on line channel are driving down consumer goods sales volumes AND chains have to re-think new potential revenue streams and invest more in PLs. Especially these, in fact, seem to be the lifeline for consumers that prefer them over the brand industries, at least according to what surveys say. However, whether purchases are made in traditional brand sales points or in more affordable discount stores, the global cost of living crisis seems to help PLs in any scenario (see Iri’s analysis at p. 4). And so in France, as early as last summer, the giant Carrefour announced a 100-day price freeze on 100 of its PL products that cover the daily needs of its consumers. The list of products goes from coffee to frozen foods, from cleaning products to yogurt, up to dia pers. An initiative arrived after the French government requests, trying to defend the consum ers’ purchasing power. Also E.Leclerc, in early December, had already met these needs, setting a maximum price limit on over 230 of its essential products. Sainsbury's has also stepped up its Price Lock campaign to freeze the prices of 2,000 PL household and grocery items. Rewe expanded its famous discount brand “ja” to over 1,100 items. And Asda introduced a new first price segment called “Just Essentials”, which includes about 300 products. And, given the initial success, it had to put a limit on the number of pieces that can be purchased per person (only 3). At the same time, Albert Hejin only announced to increase the share of PL products, which is now about 50%. In Italy, Conad prolonged the “Bassi e Fissi” (Low and Fixed) initiative until September 30. However, there are also those who use the “shrinkinflation” strategy to miti gate price increasing on raw materials and operating costs. Through this marketing strategy, in fact, companies reduce the quantity of product in the packaging of FMCGs, keeping prices unchanged. This is the case of Tesco, who reduced by 50 grams the weight of the entire range of PL ready-to-eat meals and, previously, also Morrisons had acted similarly. A dangerous path which could threaten the consumers’ strong trust in PL, and thus turning into a boomerang effect on the entire category.

Maria Teresa Manuelli Editorial director

PL: through thick… and less thick

di Maria Teresa Giannini

I

n the first 5 months of 2022, the market faced a purchase prefer ence change: as Iri data show, thanks to the surveys made from January to May of this year, also for PL the consumptions are mov ing towards the Mainstream and First Price segments. However, this is not an absolute truth for all the sub-categories. So let’s go into details.

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pon analyzing the market supply, the segments in which PLs have the largest share are meat (50.9%), frozen foods, which Iri refers to as "refrigerated and frozen," (40.3%) and fresh foods (39.3%). This is reflected in performance, which displays the larg est increase in meat (+2.6%), followed by frozen foods (+0.9%) and fresh foods (+0.9%). The same cannot be said of the trend in val ue, which is up for meats (+13.7%), though down for frozen foods (-0.1%), and displaying a slight increase in fresh foods (+3.6%). Further, in the first half of the year, promotional pressure on PLs dropped in every distribution channel except e-commerce (+0.4% with a market share of 17.3%): compared to a market average of 16% of shelf price. The greatest drops are recorded in home care and toiletries (-4.6%) where promotional pressure is the lowest (12.1%).

The best figures are those of hypermarkets (-1.2% with 21.8% promotional pressure), superstores (-1.2% with 19.4% market share) and LSPs (-0.9% with 13.1% market share). The situation worsened slightly in May, which was individually analyzed, where the decline also involved e-commerce (13.5% promotional pres sure, -2.1% market share) and in which promotional pressure fell even more in drugstores and superstores. As for demand in indi vidual segments, in Prime Price, the brand industry lost sales in all modern distribution channels (-7.4%) except in discount stores, where it increased in value (10.5%).

PLs are growing, albeit to different degrees depending on the channel: again, the increase in value is higher in discount stores than in the rest of modern distribution (+6.2% and +3.3%, respec

tively). The Mainstream segment displays a real polarization: while here "medium" industrial brands lose "discount" (-1.9%), industrial brands show double-digit growth (+12.6%).

On the other hand, PLs (other brands and organized distribution brands) increase (+6.8%), unlike the private labels of store brands and ‘kid’ brands which display a lower increase (+1.6%). More moderate, compared to the aforementioned PLs, is the growth of PLs dealing with functional foods (+3%).

F inally, in the Premium range seg ment, which displays a decrease (-3.5% on average), the only growth figure is represented by the Premium lines of PLs (+7.7%). Thus, not only has the gap between industrial and PLs widened; in the vast set of PLs, certain trends emerge that are typi cal of periods that, much like the cur rent one, are characterized by price tension.l

THE RIGHT MOVE Positioning strategies and prices of European PL in the fight against inflation

After more than 75 years of peace and economic growth on the continent, Europe is back in the eye of the storm due to the war at its borders, the energy crisis, and inflation, which have shown no signs of ending soon. Regarding inflation, it sur passed 9% in Italy last August, but in other countries, the number has already hit double digits, such as in Spain (10.3%), Belgium (10.3%) and the Netherlands (13.6%). With a similar situation in the background, the gap between PL and Brand Industry could be come a new field for brands to explore and a vast choice for consumers, as positioning, assortment va riety, and price become even more crucial elements than usual.

u A love for (private) label

Europeans in love with PLs (and not only in the EU). 60% of respondents consider PL products equivalent to those of the brand of industry, while 22% prefer distributors to man ufacturer brands. Compared to the opinion before the pandemic, 17% state that they trust the quality, value and performance of PLs more. These are the results of a Surveylab survey carried out in April 2022 on 6,500 consumers in eight countries: France, Germany, Italy, Spain, Netherlands, Poland, Sweden and the United Kingdom.

ITALY: THE ‘PICTURE’ OF GRUPPO D.IT

For the aforementioned reasons, some people think that even a situation as negative as this can create a develop ment opportunity in the future. “In 2022, we are experienc ing a significant growth of our PL value. - affirms Alessandro Camattari, Sales and Marketing Manager at Gruppo -. Of course, this data is partially influenced by inflation. However, even excluding the changes to pricing, PLs are showing a major presence in customers’ shopping carts. If we consider our own range, on the one hand, we are rapidly increasing our presence in the ultrafresh segment, and on the other hand, we are considering the presidium of high-penetration non-food categories. In the food indus try, the mainstream range confirms the same percentage as 2021. At the same time, both the Gusto&Passione Premium line and the Premio discount line are in creasing. The VerdeMio organic line remains sta ble while Equilibrio&Piacere is decreasing. In a period in which there is less promotional pres

PPL PRODUCTS IN EUROPE

For 60% of Europeans equal to brand industry; For 22% better than the brand industry.

sure, mainstream ranges are the main tool to ensure everyday convenience. However, we are speculating ad hoc interventions on specialized lines, in order to increase their appeal.”

UNITED KINGDOM: THE PL SHIP PROPELLED BY INFLATION. SAILS SET TO 60%

Across the channel, there is more fragmentation and competition in the retail world after Covid and Brexit. In the country at the head of an Empire, which mourned the loss of its Queen in mid-Sep tember, Richard Hyman, partner of Thought Provoking Consulting, was already claiming be fore the summer that the PL would reach 60% of market value in the near future, thus achieving a more diverse and heterogeneous group of con sumers due to the loss of purchasing power. Ac cording to experts, inflation, with its inevitability, will influence many corporate policies. “It will also be a problem for the ‘Big Four’ (Tesco, Sainsbury’s, Asda and Morrisons edn), as they will need to ask themselves how long the consumer will be able to afford the increasing prices. - said Hyman in an interview with PLMA Live -. Furthermore, will the brands be able to communicate sustainable and eco-friendly messages at the same time as af fordable prices?” Today, we know that inflation is 10.1%, and exceeding, even if only slightly, the 10% predicted in the last Bank of England report. This has already caused a shock: for the first time in the history of the United KIngdom, the discounter Aldi has overtaken Morrisons. This is one of the effects of the movement of about £2.3 Billion, cor responding almost entirely to food expenditures that used to be conducted in supermarkets, nota bly including Morrisons.

Nat u r a l q u al it y fo r yo u r b r a n d :

t r us t t h e L e ad e r

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.

SPAIN: PLS DRIVE INTERNATIONALIZATION

A few years ago, the buzzword of the Spanish colossal El Corte Inglés was ‘internationalization’ and its private labels represented the key to success. Then, the pandemic, and the strategy of internal diversification before that, seemed to have changed the direction of the company. Instead, still in 2022, in addition to the Sfera fashion brand and the travel division Veci (short for Viajes El Corte Inglés), its private label gives a moderate boost to international business in more than 30 countries where the chain is active, including the European Union, the United States, Mexico, China and India. The company has subsequently added new categories and references in the household goods sector in these countries, where it can count on local strategic partners, as is detailed in its sustainability report. Also in 2021-22, El Corte Inglés presented its new household goods brand in the Mall of Andorra, in the principality. In the food indus try, the chain maintains existing agreements, with the addition of a collaboration with Shinsegae, a south-korean supermarket fran chise, which started to sell Club del Gourmet products. The Ma drid-based group has also expanded its collaboration with the Sori ana supermarkets in Mexico, to sell organic private label and Veckia personal care and hygiene products. However, the brand with the most popular interna tional presence is still Sfera: in 20 countries with 323 sales points, including 65 owned and 256 franchised, 51 pos in Mexico (the country which hosts the most) and 2 cor ners in Portugal.

The best of youth

According to Surveylab once again, almost three interviewers out of ten say they buy more PL products now than before the pandemic. However, most important is that the most significant increases are recorded among the youngest participants of the survey, namely consumers who are Millennials or GenZ.

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for consumer goods,

citizens and households, who

week

stores such as Lidl and

PORTUGAL: LESS BUDGET, MORE ATTENTIVE CHOICES. AND YOUNG PEOPLE FILL THE SHOPPING CART MORE OFTEN

In Portugal, in the first two month of 2022, about 58% of goods had re corded a price increase , including basic products such as rice, UHT milk, various types of butter and olive oil. The constant and, from a certain point onwards, accelerated growth of PLs occured in parallel with the decrease of the total budget allocated to spending, as in the well-known commu nicating vessels experiment. According to a study on FMCGs carried out by Kantar for Centromarca, reported in the lusitanian Jornal de Negócios magazine, the overall decline could be seen both in value and volume and marked the worst of the last three years. Today, the market share of PL stands at 41.1%, up 2.3% from 2021 and 5.2% from 2019, with a purchasing frequency that, though generally stable, appears to have increased com pared to younger consumers’ habits. Brands that have recorded PLs with notably good performances in the country are undoubtedly Mercadona, which announced in May its objective of business expansion for 2022, as well as Intermarché.

FRANCE: MODERNISATION AND AFFORDABILITY, PRIVATE LABEL VS BRAND INDUSTRY 1-0

At the end of July 2022, the French chain of the Les Mousquetaires group launched a trans parency and claim reformulation exercise on 2,300 PL products in order to make them more competitive from a sustainability, nutritional contribution and social-economical point of view. In other words, the brand isn’t aiming at individual components of shopping (product quality, price, variety of the assortment) but at a rebalancing of all three. To do so, Intermarché planned an important investment on research and development, quality, sales and marketing teams, both in-house and external partners. According to the company, the re sults of the work done up to now are evident, especially in the food area: for example, scan ning Intermarché’s entire PL range on the Yuka app (legal in Italy again as of August 2022), one finds that it earned, on average, four points more than in the past, bringing her to the top of the PL food products ranking in France. Vincent Bronsard, president of Intermarché, declared: “Along with the actions we’re taking to support our customers against inflation, we are determined to constantly improve our products. We are witnessing important progress, such as the withdrawal of 140 contested additives in over 1,000 recipes, the packaging restyle of almost 1,000 prod ucts to make them recycled and recycla ble, and the development of our own as sortments linked to the local area, of high

environmental and organic value . We are on track to reach 6,500 improved products by 2025.” Carrefour, on the other hand, has chosen to act on price so as to consolidate the trust addressed to the brand, instead of repositioning the product in a more traditional sense. In fact, the company has launched the initiative ‘Prices frozen on 100 products for 100 days’ regarding its PLs in France. The initiative, which started last August 22nd, and will end on November 30th 2022, follows many others included in the wider framework of a campaign against inflation that started in June. These involve different products, both food and non-food related, and refer to all French Carrefour stores (regardless of the format), and the ‘Carrefour.fr’ portal.

DELHAIZE: PITFALLS IN EUROPE, WELL DONE IN THE UNITED STATES

After significant announcements at the end of 2021 that culminated in a well-perform ing first quarter of 2022, a product of the effects of the Covid-19 pandemic. The second quarter finally brought with it expected difficulties for Delhaize. Consumers continue to spend but prices are moving in the opposite direction of the brand, which is also part of Les Mousquetaires Group. The brand re corded a €19.8 billion turnover, but there is a significant difference among the Eu ropean and non-European pos. If one is to consider only the stores that have been open for over one year as a bench mark, Delhaize has a figure of -3.1% in Europe and +3.3% in the United States, where inflation, energy price and the war in Ukraine have less of an impact. As a result, the retailer is now launch ing loyalty programs and will further cut costs to be more competitive in the eyes of its customers. PL products play a key role: the Benelux represents more than half of the sales, and yet Delhazie lost market shares as the Dutch market was hit hard by inflation. This is a historical pillar of the brand, which is fighting back by proposing innovations to the range. The company wants to double its plant-based products and dairy substitutes by 2025, increasing from 400 to 800 refer ences and leading consumers to the transition to plant-based foods.

CONCLUSION

The most unfair of all taxes, as Luigi Einaudi used to call it, has reached the level of the mid 80s. The common objective of all the retailers, then, is to stay in the game and outplay the other competitors; everyone, however, finds the right mix of moves, always remembering how important it is to ‘keep the white’, like in chess. l

Maria Teresa Giannini, Professional Journalist specialized in Large-scale Distribution.

Metro, wholesale and private label a special marriage

Wholesale retail has a special, but great and natural relationship with private labels, as it addresses professionals, or better, people who get down to business, more than the end consumer.

And these customers look for a balanced relationship between quality and price, but also a high level of service and customization, which can only be achieved when the goods are directly managed, just like PLs. Claude Sarrailh, Chief Customer and Merchandise officer at Metro Ag , tells us.

What is the share of your PL products on the total sales?

On an international level, we are talking about 17%, with significant differences from one country to another. In Italy, the incidence is already 25%, therefore in line with the average for large-scale distribution. In the long term we want to reach, globally, 35%, with a range that will be enriched, above all with items tailored to professional customers of Horeca and independent retail.

What are the most relevant categories for your PLs?

Let's talk about Italy: here catering and small business professionals purchase especially disposables, frozen foods and canned goods. Relevant are also the fresh, such as dairy and meats, where the commercial proposition is defined based on partnerships with local and regional producers, a criterion ever more important for the Horeca. In the non-grocery and nonfood categories, seasonal and kitchen and cooking items dominate.

How many lines and brands are there?

As a wholesale specialist, in over 30 countries and with a focus on Horeca customers, Metro offers eight main brands, on different price levels, so as to meet everyone’s needs. The most relevant brands are 'Metro,' 'Metro chef,' for food, and 'Metro professional' for Near (home

and personal care, ed.) and non-food categories in general. Finally, 'Aro' (detergents, but also pans and cutlery), which covers the entry level, counts a lot.

Is Horeca still the main customer in home food service, in the so-called Fsd?

In general, yes. There is a direct link between the purchase of pls and the profession of customers, who tend to build loyalty in a very similar way both in the store and in the online channel.

Private label and sustainability, still a hot topic. How does Metro respond?

The motto of our 'sCore' growth strategy is 'Doing wholesale right,' and this means - also, but not only - that we want to develop responsibly, expanding our supply, yet with lowimpact products. We want our customers to feel no need to ask whether a product is sus tainable or not, because we have already provided for that. In this regard, we are working hard to implement policies and action plans that include environmental, health and animal welfare. A few examples: no soy product can use GMO raw material, or cause severe crop depletion. Then, within our 'Health & nutrition strategy,' we re-think products to make them healthier, by reducing salt, sugar, saturated fat and additives. In fact, by working closely with suppliers, we can offer an organic range, within 'Metro Chef'. Our production partners are supported in understanding their own impact, through carbon footprint analyses.

METRO ITALY

Cinisello

And what about the results?

Just to give you an example of the milestones, due to improved packaging, we scored 78 points in the Dow Jones sustainability index 2021, an increase of 22 %compared to the previous year.

New products and product launches: what's cooking?

When we integrate new products into our supply, we do so keeping our customers' needs in mind. To support them in creating their signature menus, we provide both local and regional specialties, as well as products from around the world. For example, we will have the fresh ‘Metro Chef Pineapple’, from ‘Costa Rica’, and ‘Lime Metro Chef’, in 4 kg boxes, from Brazil, both imported by sea. Globally, we are going to launch more alternative meat and dairy variants under the Metro Chef veggie umbrella. On the other hand, locally, our Italian colleagues, in collaboration with our chefs, are creating products such as a special pizza flour that meets the needs of pizza chefs, or a cream cheese specially created for Japanese restaurants.

How long is the average duration of contracts with suppliers?

In general, we aim for long-term collaborations with our partners, in order to jointly im plement important criteria for equally important issues, such as quality and sustainability, which must meet our strategic guidelines. This is at the base of any great new product generation, which then gains the trust and builds the loyalty of professionals. Of course, the duration of each contract differs from product to product. But to give you an idea, there are industries that have been working with us for decades. Zanetti, for example, has been with us for more than 30 years now. l

Private Labels: option or NEED?

In a scenario of year by year disruptive and unexpected situations since 2020, companies in FMCG supply chains are increasingly tied to distributors’ choices, who try to ‘normalize’ the pandemic, lose sales volumes (although values grow), compete with the ‘zero point’ of shares (will we actually have a new leader soon?) and seem increasingly similar and interchangeable, simply serving as a flat backdrop to the innovation and success of discounters. Is PL in this context an option or a necessity?

THE SCENARIO

Data over the past twenty years show a slow and constant growth in the share of PL products and a corresponding decline in the share of brand industry products. In recent months, major retailers have raised the bar above 30% and up to 50% of the target PL share of their sales, but it is the 22% share of discounters in Italy that, with Private Label sales accounting for be tween 60% and 80% of sales, is generating the most significant development, including PLs, in large-scale distribution in Italy.

PICTURE 3.16 THE BRAND INDUSTRY LOSES MARKET SHARE.

(Sales in value, Total of Grocery, Iper +super + Lib ser, incidence %)

*Data referred to the first semester

Source: Ufficio Studi Coop - Nomisma on Nielsen Data

Datafrom the first 5 months OF 2022 show an acceleration of the process, exacerbat ing the crisis of the role of the brand industry that, only in some cases is in partner ship with PLs retailers and in many others sells only when the price cut is 50%. And Meanwhile, PL consolidates its role of ‘brand’ in Italy, representing, for example, over 50% of total organic sales in retail (Nielsen, May 2022).

This phenomenon takes place in a context where the rising costs and the consequent inflation result in a (un)negotiation still open on price lists, between the manufacturer and the distributor. Based on a survey conducted by IPLC (2022 Report) on a few dozen PL manufacturers in Europe, a simplified example was developed in early 2022. The example simulated the path of profitability recovery and maintenance undertaken by the manufacturer in relation to the

Leader (First category brand) Follower (from II to IV category brand) Other brands PLs

increases required until January 2022. Just think how severe the problem may have become today after several months of inflation:

Source: IPLC, January 2022. Simplified simulation based on interviews with European manufacturers

Note: The 6.8% average cost increase negotiated so far by the supplier was not enough to cover the increase in sales costs. In fact, this increase would still bring a loss of €600,000 over the year. An 8.1% increase would see a net profit of 0.4 percent, and a 13.9 percent increase would be required from customers to restore the 4.8% net profit of 2020.

But what can we expect in the short and medium term?

IPLC has conducted an assessment of scenarios in European countries, and we believe more oppor tunities rather than threats are on their way from the perspective of PL development for all the players in the supply chain, especially in Italy.

INTERNATIONAL: THE CONSUMER

Consumer behavior has significantly changed in the past three years, and this change has been much faster than the distribution companies’ up date. As shown in the table, the search for convenience is not separated from the demand for quality and gratifica tion. And, although to a different ex tent, this regards all income segments of the population. It was precisely the PL that created a new paradigm of accessibility to value that, in the past, was reserved for the brand industry.

Hence, PL has emerged as a ‘brand’ in Italy, accounting for over 50% of organic sales in retail and helping narrow the price gap between conventional and organic (Nielsen, May 2022) by making the latter more accessible.

INTERNATIONALIZATION: THE MANUFACTURERS

The world of manufacturing, brand industry, PLs and SMEs in Italy has ahead the possibility to play a relevant and essential role for Italian supply chains. There are tremendous opportunities that, re gardless of geopolitical dynamics, are already in place in international markets. And this becomes even more relevant and attainable precisely because of the development of PLs in all major countries

The state of Grocery Retail 2021 in Europe

McKinsey & Company, Eurocommerce

around the world. Accessing different markets (also) through PL is a lever that makes internationali zation something concrete, even for companies that do not have sufficient know-how and resources for establishing their brands abroad.

According to an estimate made by IPLC Italy on 2021 data shows the "pie" of PL sales, comprising some of the major countries in Europe, excluding Italy, is more than 250 billion euros, and this value is likely to increase, not only because of the effect of the inflation, but also because of PL’s greater appeal in this point in time.

UK

Germany

COMPETITION IN LARGE-SCALE DISTRIBUTION: THE DISCOUNT CHANNEL, IMITATION OR DIVERSIFICATION?

The rising inflation, the uncertainty over costs and demand reactions, are leading to a buzz in Italian retail, which sometimes appears ‘unsure’ in defining strategies. Some are turning to partnerships and, when possible, mergers and acquisitions (including from abroad), while others are trying to relaunch strategy and positioning while staying within their own borders. Faced with the demand for saving and the success of discounters, some retailers seek to distance themselves from them as far as possible, establishing their own positioning and business model, op posed to that of discounters. Others, however, seek partial "discounting" solutions to their business model. In this second case, the risk is that retailers with a good identity and not ‘natives discounters’ try to imitate only some aspects that, alone, cannot generate the unique competitive advantage of discounters.

An analysis conducted by IPLC at the European level shows that all the connotative and distinctive elements of the discounter model present in the different stages of the supply chain, up to sales points and retail marketing, lead to a profitable combination of their individual variables (efficiency

of production, logistics, retail, personnel, services, PL assortment, etc.), which is actually up to 5% higher than non-discounter business models.

A percentage that, when compared to an average range of the net profit of retail grocery chains in Europe, can definitely make a difference, especially if this model is still able to adapt, becoming at tractive, not only in terms of perceived convenience, but also in terms of accessibility and perceived value.

For instance, after three years of its project involving the PL Jack's and PL discount stores launched in late 2018, Tesco's recent experience was a failure. Here again, as happened in Italy, we see that being a qualified retailer is not enough to launch a successful discount chain.

To make Tesco stores competitive, the same selling price of Aldi stores has been adopted for a few hundred PL products ("Aldi Price Match" campaign) with a punctual and direct comparative approach in communication that Italy seems to be reluctant to adopt. Tesco claims that the quality of these products hasn’t changed, but has launched a discount product line with a higher perceived quality than the Tesco PL, due to its packaging, as shown in the image below. Shall we speak of con fusion or constant experimentation?

CONCLUSION

With very rare exceptions, a complete, clear, well-articulated and qualified PL supply is not an option for distributors, but rather a need. However, PL is now an opportunity perhaps not only for them but also for SMEs that, thanks to PL products,can enter the market (shelves) more easily, export with zero investments in communica tion, brands and distribution. Even for the brand industry, PL would be an opportunity, who knows how many have actually noticed that.

Paolo Palomba

Managing Partner Expertise on Field/partner IPLC Italy

Fair Trade, PLs and fairtrade union grows

Large-scale distribution remains the main distribution channel: at present, there are more than 2,500 certified references in the PLs of Conad, Selex, Carrefour, Despar, Pam, Lidl, In’s Mercato and Aldi.

The last annual report of Fairtrade Italia (http:// annualreport2021.fairtrade.it/) is clear: the con sumption trend of products characterized by Fairtrade certification is positively increasing. Fairtrade Italia is an organization that promotes the development of the fairtrade supply chains in Italy. Ac cording to the report, Italians spent more than 550 million euro in products with at least one certified ingredient in 2021. Some product categories stood out, such as cocoa with 9% growth ( 8,909 tons sold), sugar with 10% growth (5,158 tons sold) and bananas, which started to increase again (14,230 tons sold) af ter the decrease of the Covid emergency period. The overall average growth was 6%.

Large-scale distribution remains the main supply channel and PLs have a privileged role: at present, there are more than 2,500 certified references in Conad, Selex, Carrefour, Despar, Pam, Lidl, In’s Mercato and Aldi’s PLs. The products with the traditional black Fairtrade logo are the sales pillar in Italy. However, the push of the white Fairtrade Source Ingredient (FSI) logo is also growing, due to volume increase, especially for cocoa due to the flexi bility of the raw material that it allows. Indeed, through the Fsi model, cocoa was inserted in many product recipes such as breakfast cereals, snacks, ice-cream, biscuits and in a wide range of products for special occasions and holidays such as Valentine’s Day, Easter and Christmas. For example, in 2021, Coop, the first Italian retailer to develop a Fairtrade PL line, offered a white and salted chocolate egg with fairtrade cocoa butter for Easter. In IN’s Mercato’s shops, Fairtrade-certificat ed products such as chocolates, dark chocolate praline and extra dark chocolate eggs have been placed on the shelf. In Lidl stores, there are PL products such as soft nougat and puff pastries made of Fairtrade certified cocoa, and Aldi offers a wide range of chocolate eggs, lambs and other characters. At the same time, thanks to product sales in Italy, advantages for farmers’ and work ers’ organizations in Asia, Africa and South America have increased. In fact, they re ceived 3.2 million euros at the Fairtrade Award. Together with the Stable Minimum Price, this Award is one of the key pillars of the Fairtrade model. Practically speaking, the organizations receive an extra sum of money for the development of initiatives of collective interest, decided through a democratic process. The award can be used to improve farms from a technical or production point of view, such as through the pur chase of fertilizers or other agricultural products or machinery. It can also be used to build classrooms and schools, healthcare facilities and more.

Through this system, Fairtrade offers companies a model to promote sustainable agriculture, with clear information on the impact that they have in the communities with which they collaborate. “The collaboration between PL and Fairtrade Certification suits the needs of consumers who look for sustainable products in their daily grocery shopping that keep promises and are able to promote real and val uable improvements for people's lives and the planet”, commented the Sales Manager of Fairtrade Italia, Thomas Zulian. “Thanks to the collaboration and encouragement of our partners, we were able to renovate, making our supply easier and more accessible. I’m referring to, for example, Fairtrade Source Ingredients, but also the important opportunities that we offer the companies. We also involve them in the discussion on fundamental topics such as rev enues and fair salary, gender equality and climate change. On one hand, the number and volumes of PL products certified Fairtrade continues to grow on the shelf. On the other hand, the positive impact for farmers, their communities and the environment multiplies as well.” .

Bia: CousCous is becoming increasingly popular, even beyond the borders of the Mediterranean

The company, leader in the organic segment, became part of the Bonifiche Ferraresi last summer, moving from its old owner ship to the pillar of Italian agriculture.

by Maria Teresa Giannini

Couscous, a very ancient product with Maghrebi origins and Sicilian by adoption, is now well known and appreciated all over the world. In Italy, Bia is the specialist of this versatile dish of durum wheat semolina. Located in Argenta, close to Ferrara, it operates in more than 50 countries, especially thanks to production for different private labels, Ho.Re.Ca. collaborations and customized productions. With its three factories, which employ 75 people and have an annual production of 54,000 tons, Bia achieved a turnover of 33 million euro in 2021, +10% compared to the pre-pan demic levels of 2019. The company is a leader in the organic couscous segment and, last summer, entered the Bonifiche Ferraresi ‘family’, moving from its old own ership (95% to private equity firm Alto Partners and the remaining 5% to IT com pany Gescad) to the pillar of Italian agriculture. But how can couscous be defined from a commodity point of view? And what is the future for Bia after having joined BF? We talked about it with Giulia Pasquali, Sales Manager at Bia.

Do Mediterranean countries continue to take on the lion’s share of the demand, or has the center of gravity of couscous consumption moved elsewhere?

Mediterranean countries continue to con sume the greatest volumes, especially France and Spain, along with Sicily, a re gion in which couscous is a traditional dish thanks to the melting pot of Arab culture and Greek-Latin peoples. However, for the past few years, the center of gravity has been moving towards central and northern Europe, with consumption steadily increas ing in Germany (especially organic), the Netherlands and Scandinavian countries.

countries

Players of the durum wheat semolina market agree to define their market as being a ‘mature’ one, predisposed to be transformed into ‘premium’ in Italy - can the same be said for couscous?

Yes, this isn’t considered to be an ethnic product anymore, and has become a basic ingre dient for any type of cuisine. That is the reason we created a Premium line of the supply chain with 100% Italian wheat, which is already widely popular in the Italian large-scale distribution.

On the 19th July, you were taken over by Bonifiche Ferraresi: what are your prospects for the future thanks to this new management?

The official takeover will be in October. Bia’s management won’t change, but we hope new and important domestic and international opportunities will arise for all the companies of the group.

In one year, you produce over 24 million cases: what’s the share amount destined for largescale distribution and how much is destined for Italian brands specifically?

About 70% is destined for large-scale distribution, among which 25% is destined for Italian large-scale distribution. The same goes for its value.

Compared to the total production, how much does PL account for you?

About 50%.

When did you start to invest in PLs as a possible channel for your production? Overall, has it paid off for you over the years?

From the beginning, we have believed in the development of PLs. In fact, for 20 years, all the major PLs have relied on us for their PL couscous. This segment has paid off over the years, thanks also to our flexibility and capacity to customize our supply. We were able to meet all our clients’ needs in terms of products, packaging and recipes.

How’s the PL couscous market?

Demand is constantly growing: we work with all the major brands of Italian and internation al PLs and, until a few years ago, each of them only had one couscous reference. In the last few years, however, many PLs have added other PLs, moving from whole-grain to organic and gluten-free products. And there’s more; we continue to receive many requests from new PLs entering the national and international market for the first time.

The market for flour and semolina, during the worst period of the pandemic, recorded peaks (in value and volume) that we haven’t seen for a while: was it the same for couscous specifically?

Yes, our couscous is made from durum wheat semolina and other pulses and cereals (such as corn, barley, spelt, lentils, chickpeas and buckwheat) that form the basis of our diet. Not only does it have very simple and fast preparation, it’s also a very versatile product, suitable for many cooking experiments (both sweet and savory).

Your couscous cooks in 5 minutes instead of 15-20: to what clientele is this information aimed at? Is it meant for the big-city customers, who usually don’t have much time for cooking?

Our couscous is ready in 5 minutes with hot water and in 15-20 minutes with cold water. We have specifically designed a cooking recipe that can meet both the "speed" requirements typical of many people's daily lives, as well as environmental sustainability needs, since cold water preparation involves no energy consumption.

On your website it reads: “Thanks to our research team and experience, we are able to develop custom products from any raw material. We also realize the packaging, from the graphic design to supply”. How does your team plan to face the paper and cardboard shortage as a result of the Russian-Ukrainian war since March 2022, as reported by Assografici?

We believe that the main problem is to face the uncontrolled price increase of all the materials that make up the product (pa per, cardboard, plastic, but especially gas and electricity). We have a long-lasting relationship with our suppliers, who are part ners that support us for shared company development. Togeth er with them, we’ll put in place everything needed to continue to provide the high-quality service that we’ve always guaranteed to our customers. l

Pasta and rice of PLs down, well done the fresh and ready-to-eat segments!

Good value for money, larger number of references on the shelf, local specialties and imaginative recipes are what underlies the growing consumer appreciation for this type of PL.

In 2021, the household consumption of pasta, rice and the other ingre dients constituting the main courses of the Mediterranean diet was marked by the end of the emergency anti-Covid measures and the con sequent restart of restaurant activities and other out-of-home channels.

For example, in terms of Italian households' purchases of semolina pastaaccording to Ismea surveys - a 9.8% contraction in volume and 5% in value was recorded, yet with a sharp increase in the average price (+5.3 percent).

PL has basically matched the dynamics of this market, with some segments - such as fresh pasta and ready-to-eat pasta dishes - recording interesting numbers and a remarkable evolution: good value for money, larger number of references on the shelf, local specialties and creative recipes are what underlies the growing consumer appreciation for this type of PL.

2021, Todis saw a negative trend of semolina pasta and rice compared to the exceptional sales of 2020.

The best

ENCOURAGING TRENDS DESPITE THE NEGATIVE REBOUND

In 2021 semolina pasta and rice proved to be among the sectors with the highest pene tration rate among Italian consumers. "Last year," - explains Francesco Iuculano, Sales Manager at Todis- "both categories in our stores, as well as in the overall market, saw a negative trend compared to the year 2020, which was characterized by exceptional sales due to the lockdowns and other restrictions aimed at containing the pandemic outbreak. However, we kept innovating, and over the course of the year we launched a number of new products. To mention one, we introduced the ever-more successful ‘Linea Bianca’, with its 100% Italian wheat and bronze-drawn pasta into the ‘Cuore Mediterraneo brand’. Noteworthy is also the good performance of whole wheat pasta, which ended 2021 with a growing turnover."

FRESH PASTA AND READY-TO-EAT MEALS HAVE A LEG UP

The gradual return to normal life together with the resumption of on site work activities and the consequent lower amount of time dedicated to food preparation for lunch and dinner have contributed to the good performance recorded by ready-to-eat first courses. Not for nothing, brands have gradually increased their PL supply in this category. "Un like semolina pasta," - adds Francesco Iuculano - "the fresh pasta segment, in particular stuffed pasta, has been growing, covered by our premium brand ‘L' Arte delle Specialità’. Moreover, in 2021 we recorded an upward trend also for the ready-to-eat soups and broths, in particular, in the soups of the IV and V range sold in the salad section. This section indeed boasts a significantly consolidated turnover, especially when it comes to our brands ‘Bontà dell'Orto’ and ‘L'Arte delle Specialità’.

In Todis stores in 2021, whole wheat pasta, which ended the year with growing sales, performed well.

THE WAY TO A CUSTOMER’S HEART IS THROUGH THEIR STOMACH

The year 2020 encouraged brands to extend their lines to different categories, to meet customers’ need for quality and, at the same time, fulfill their sensorial experience, also in the main course mar ket. "Our brand ‘La Rosa dei gusti’ was founded in mid-2020 with the ambition of transforming food from a need to a conscious desire," says Antonella D'Andrea, Commercial Coordinator of Cuore dell'Isola (Abbi Group), "accessible to everyone and at all times. During our first year, that is, until 2021, we can proudly state that we achieved even greater sales results than expected. For example, in 2021, in fresh stuffed pasta - one of the first segments targeted - we reached a high market share. Imagine that in ‘fishbased pasta’ our share is around 90%. One of our main goals is in fact precisely to cover the greatest number of categories, includ ing the one under consideration, gradually increasing our market share by taking it away from industrial brands."

THE RACE ON RECIPES AND TECHNOLOGY

Price is certainly not the sole playfield of large-scale distribution brands and industrial brands. The search for the right recipes and the use of technology are equally important. "Our ambi tion is to define ourselves as ‘the architects of flavor’, '' adds An tonella D'Andrea, "we scout out the best proposals, and analyze them until we break down the raw materials at the base, and from there we redesign them and then bring them to our con ception of excellence and innovation. In the stuffed pasta category, for example, we took a puff pastry, containing a very high percent age of eggs from free-range chickens, and then stuffed it with products unique in flavor and texture, such as the inimitable Kobe meat and the specialty of king crab and the cavi ar. Another key factor for us is technology. For our selection of ready meals, such as lasagna, spelt with mazzancolle shrimp or cannelloni ricotta and spinach, we have adopted an inno vative preservation technique: the Hpp tech nology, the high-pressure treatment that, with no heat input, inactivates the microorganisms present in foods so that packaged foods are microbiologically stable and safe for longer periods. Basically, a long preservation, without preservatives and/or additives."l

In fresh stuffed fish-based pasta, Abbi Group's ‘La Rosa dei gusti’ brand gained a market share near 90% in 2021.

Fabio Massi, Journalist specialized in Retail and Mass market issues.

The assortment of Main Courses grows

QBerg analyzes the fllyer supply and web assortment of Main Courses in 2022

QBerg, a leading Italian Research Institute in price intelligence services and analysis of cross-channel assortment strategies (flyers, physical stores, e-commerce and newsletters), has analyzed the flyer supply and assortment in the online virtual shelves of Main Courses in the first half of 2022 compared to the same period in 2021. The following have been ana lyzed: Dry Main Courses (i.e., pasta, risottos, noodles mainly in dehydrated pouches), Ready-to-eat main courses (soups, lasagna, pasta, etc. that only need to be reheated), and Frozen main courses (which include both classic frozen main courses and the so-called "stir fry" segment, i.e., main courses that are revived pre cisely by stir frying them).

The presence of the Main Course segment, represented by the Qp4 Share of Flyer Visibility and Web Display Share, is significant: in 2022 the visibility share equals 0.92% for the Flyer, and 0.94% for the web, which corresponds to slightly below 1% of the total assortment of fast-moving packaged goods (FMCG). Noteworthy is also the positive change that has been recorded on promotional flyers in the positive transition between the two years in terms of share. Leading this positive trend are Ready- to-eat Main Courses and Frozen Main Courses; the exact opposite is the trend of e-commerce, which show a slight contraction, led mainly by Dry Main Courses.

Flyer and Web Visibility Share in the subcategories of Main Courses (Semster 01/2021- 01/2022: Qp4 Share, Display Share

Fatto 100 l’esposizione Flyer e Web dei Primi piatti, la private label risulta molto presente nel segmento Primi piatti pronti con un aumento della quota di visibilità sul Flyer e una leggera

Molto più contenuta la presenza nei Primi piatti asciutti. Qui la Gd ha deciso di depotenziare l’offerta promozionale dei propri marchi con un calo deciso di quo ta dall’1,91% allo 0,24%, congiuntamente all’esposizione online (pur se con una con trazione meno decisa, dal 3,56% del 2021 al 2,40% del 2022). PL più presente nel segmento dei Primi piatti surgelati, in leggera contrazione sul Flyer e addirittura in leggero aumento sull’online.

l Ready- to-eat Main

Source: In-Store, POINT 2022

Considering the percentage of Flyers and Web display of the Main Courses, Private Label has a strong presence in the segment of Ready- Made main courses with higher Flyer visibility and slightly lower web visibility. Considerably more modest was the PL presence in Dry Main Courses, where large-scale distribution has opted for a downgrade of the promotional supply of its PLs with a sharp drop in share from 1.91% to 0.24%, together with the online display (although with a less significant contraction, from 3.56% in 2021 to 2.40% in 2022).

PLs are instead more represented in the segment of Frozen Main Courses, slight ly contracting on the Flyer, yet moderately growing online .

Flyer and Web Visibility Share in the subcategories of Main Courses (Semester 01/2021- 01/2022: Qp4 Share, Display Share)

Source: In-Store, POINT 2022

Partly undoubtedly driven by the supply crisis that afflicted Europe in the second half of 2022, and partly due to the concurrent energy crisis (which impacts production and storage costs especially in the frozen food segment), we are currently witness ing an overall increase in the average price per kg across all segments, both in the channel on the promotional flyer and on the e-commerce of large-scale distribution.

In particular, significant are the increases that concern Ready - Made Main Courses and Frozen Main Courses, especially with regard to the offer on promotional flyers.

The only exception is the average price of Dry Main Courses in the online channel, which, instead, shows a slight decrease in price.

Average price in the subcategories of Main Courses on the Flyer and on the WEB (Semester 01/2021, 01/2022), average promotional price, average price

Source: In-Store, POINT 2022

Ready-to-eat Main courses Dry Main Courses Frozen Main Courses

Ready-to-eat Main courses Dry Main Courses Frozen Main Courses

Ready-to-eat Main courses Dry Main Courses Frozen Main Courses

Main courses

Main Courses Frozen Main Courses

The previous graph analyzed the price change of the total segments, the following graph, instead, highlights the comparison of the average price of the PL supply with the branded supply. Three aspects emerge: 4 the overall price increase in all segments, both for PL and branded products; 4 more significant increases for PL, not only percentage-wise greater than for brand ed products, but also with no exceptions across both segments and channels; 4 the price of the PL product remains significantly lower than the corresponding branded product: the exception to this are Ready-to-eat Main Courses online, a case where the average price/kg of PL is higher than the branded product. l

PL vs Brand Average price in the subcategories of Main Courses on FLYER and WEB (September 01/2021, 01/2022; Average promotional price, average price)

Source: In-Store, POINT 2022

Fabrizio Pavone Marketing Manager and Business Development at QBerg

Ready-to-eat

Main Courses Frozen Main Courses Ready-to-eat Main courses Dry Main Courses Frozen Main Courses

Ready-to-eat