Cover story

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 surpassed 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 become a new field for brands to explore and a vast choice for consumers, as positioning, assortment variety, 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 manufacturer 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 development opportunity in the future. “In 2022, we are experiencing a significant growth of our PL value. - affirms Alessandro Camattari, Sales and Marketing Manager at Gruppo D.It -. 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 industry, 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 increasing. The VerdeMio organic line remains stable 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.

(Surveylab survey, April 2022)

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-September, Richard Hyman, partner of Thought Provoking Consulting, was already claiming before the summer that the PL would reach 60% of market value in the near future, thus achieving a more diverse and heterogeneous group of consumers due to the loss of purchasing power. According 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 affordable 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, corresponding almost entirely to food expenditures that used to be conducted in supermarkets, notably including Morrisons.

PLM - COVER STORY

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.

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 industry, the chain maintains existing agreements, with the addition of a collaboration with Shinsegae, a south-korean supermarket franchise, which started to sell Club del Gourmet products. The Madrid-based group has also expanded its collaboration with the Soriana supermarkets in Mexico, to sell organic private label and Veckia personal care and hygiene products. However, the brand with the most popular international 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 corners 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.

All aboard

In Great Britain, consumers are certainly set to sail on discount stores. While general inflation reached double digits by the end of August, it is estimated that it stands at 11.6% for consumer goods, the highest level since 2008. So British citizens and households, who now spend £10.25 more, on average, per week (+£533 per year), are increasingly choosing to go to discount stores such as Lidl and Aldi. These started to become more popular in the country in the 90s and now represent 16.1% of the British large-scale distribution market, stealing (as Aldi has) shares from the Big Four.

9%

Italy

8,8%

Germany

6,5%

France

10,3%

Spain

10,5%

BelGium

13,6% netherlandS

STRATEGIES THAT SPEAK FRENCH: Renewal and transparency on 2,300 products (Intermarché); Strength through promotion, ‘prices frozen on 100 products for 100 days’(Carrefour) expansion of range, from 400 to 800 products for the new diet (Delhaize)

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 recorded 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 communicating 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 compared 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 transparency 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 results of the work done up to now are evident, especially in the food area: for example, scanning 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 products to make them recycled and recyclable, and the development of our own assortments linked to the local area, of high

In Portugal: in the first quarter of 2022, price increased for 58% of goods; PL share 41.1, +2.3% over 2021

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-performing 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 recorded a €19.8 billion turnover, but there is a significant difference among the European and non-European pos. If one is to consider only the stores that have been open for over one year as a benchmark, 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 launching 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 references 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.