Cover High value-added private labels driving innovation

High value-added private labels

driving innovation

How retail brands went from simple commodities to premium references, often anticipating trends. The effects on the industry.

In 2020, PL food product sales in Italy recorded a growth of +9.3%, thus reaching a 20% market share (+0.5% compared to the previous year) and a turnover of 11.8 billion euros (10.8 billion euros in 2019). According to Distribuzione Moderna, the supply chain of these products is a value generator, and a lever for the economic development and consequent revamp of the Country. «Distribuzione Moderna Alimentare - explained Marco Pedroni, President of ADM, Associazione Distribuzione Moderna - has an economic and social influence on the country. As a matter of fact, in 2020 it generated a turnover of 143 billion euros and it’s currently employing 425,000 people. It’s also Italian families’ number one channel for grocery shopping. Although difficult, 2020 represented a positive year for PL, as it grew by threefold compared to the products of the food industry.» Innovation, quality research, greater attention to Made in Italy and sustainability criteria is what characterizes the latest generation of PL products, which generate value for the whole industry. «PL has driven 78% of the national food industry growth in the last 17 years - adds Valerio De Molli, Managing Partner & CEO of The European House-Ambrosetti.- If they want to continue growing, innovation, research and engagement should therefore be PL brands’ watchwords.»

THE VALUE IN BRAND LABELING In particular, value-added private labels have become ever more important for PLs across Europe. Besides ensuring higher revenues, they are vital to differentiate their products from competitors’. They allow retailers to launch unique initiatives to meet specific needs of consumers, thus fostering customer loyalty. According to a research study carried out by Mintel, a market intelligence agency, new opportunities for PLs are no longer to be found in commodities but in sophisticated and high-end products. Over the years, retail brands have moved beyond the simple low-price positioning and, today, consumers tend to consider the brand value proposition as a whole. This means that quality and origin of raw materials, environmental enhancement and protection, a balanced diet and healthy lifestyle are key values for PL consumers. Furthermore, premium tiers further help companies meet their customers’ needs. Premium products allow retailers to introduce high-quality anchoring to their product mix. While these products are unlikely to be the main choice in every line for the average consumer, they are still premium offers for special occasions and, more often, for those categories that are of particular importance to them. Premium brands also reduce the possibility for higher quality products under national brands to be chosen over their products by consumers.

PREMIUM PLs WORTH IN ITALY Based on the IPLC research study ‘Opportunities in the value added Private Label Market’ (2019), the first Vapl brands appeared on the Italian market in the early 2000s, mainly as

Etruria Retail and Crai, between regionality and pleasure

u In Italy, regionality and supply chain are the real added value of Sapori & Valori, Etruria Retail brand that includes the excellencies of the territory and aims to strengthen its relationships with producers. «Etruria - affirms Maurizio Nicolello, Sales General Manager of Etruria Retail - generates over 20% of its turnover with local suppliers. Among these, 200 are under the Sapori & Valori brand, with more than 2 thousand fresh products.» Crai Group has recently revamped its premium segment with private labeled products launching Piaceri range of products, a journey through good food. Premium tier is composed of two lines: Piaceri Italiani and Piaceri dal Mondo (that is to say, Italian Pleasure and World pleasure). The first proposal is a journey where flavors meet regions, territories, microclimates and the different traditions that over the centuries have made the Italian food heritage unique all over the world. All this in a line of references enhanced by trademarks. On the other hand, Piaceri dal Mondo encompasses the excellence beyond our borders. A range that gathers the best the world has to offer, which selects products in geographical areas where they are authentic specialties. «It’s not only a simple graphic restyling of our traditional Piaceri Italiani brand- says Mario La Viola, Marketing, Format, Network and Development Manager at Crai-, but it is a project to strengthen our premium range through a proper real brand strategy developed on naming, creativity, selection, content and support communication. In conclusion, I’d like to say that we are very happy with the pay-off that we have identified - because it’s true, perfectly credible, unique, and meaningful that ‘Tradition is always right’.» The new Piaceri line comprises more than 280 products and oversees the most important goods categories, such as food, fresh and extremely fresh, service counter, drinks and frozen products.

premium regional private brands, such as Conad’s Sapori & Dintorni, Unes’ Il Viaggiator Goloso and Carrefour’s Terre d’Italia. Such initiatives were soon followed by Coop Italia’s Fior Fiore line and Top by Esselunga. These brands are still major distributor brands in the market premium tier. «Over the years, PL has largely focused on product segmentation - explains Gianluigi Andreoli, Iri Italia Account Director - particularly on high-end and specialized lines. In 2020, premium private label revenues accounted for 9.7% of the total PL turnover, while the percentage recorded for the organic ones was equal to 7.3%. Innovation accounts for approximately 5% of FMCG sales (total brand-name industry + PL) each year. In 2020, it was slightly lower due to the pandemic. However, if we look at the number of new EANs launched on the market every year (total LCC), on average 88% of the new products are launched by the brand-name industry, while only 12% by PL. In terms of value,

instead, the new PL products are 5 points higher, which corrisponds to 17%.» Speaking of innovation, instead, according to the data provided by Iri, the organic industry is one of the markets where the PL has been performing better. In fact, 22% of new organic products launched are private labels, which, in terms of value, corresponds to 43% of revenues generated by new products.

THE CHOICES OF SELEX AND CONAD In 2020, the specialized lines of Selex Group generated over 220 million euros in revenue, accounting for about 25% of the turnover. «We’re mainly focusing on the development of our high-end and organic/supply chain line - comments Luca Vaccaro, Head of Commercial Brands of Selex Gruppo Commerciale.- As for our high-end line, our aim is to expand our fruit and vegetable product range and promote Italian specialties. As to our supply chain line, we’ll include a range of antibiotic-free products to our meat line.» According to IPLC, regional and premium PLs in Italy often partially overlap, as regional origin is considered a product added value. For example, as we read in the research study «Conad’s regional PLs perfectly match the cooperative structure of the company. Indeed, it has stores all over Italy, and regional store owners are well connected with local suppliers.» And precisely this year, Conad was awarded at the prestigious European Private Label Awards 2021 for two products of their premium ‘Sapori&dintorni’ and ‘Sapori&idee’ private labels.

Over the years, Conad has developed a large project involving their private labeled products, with over 10.6 million families choosing them. Today, it accounts for about 30% of total private labels in Italian large-scale distribution. These lines are part of the premium range of the brand. The first includes a wide selection of products made from local raw materials, and traditional processing and preparation methods. Such products are carefully selected for their quality and link with tradition. The second, recently launched, expresses a new idea of experimental taste, with gourmet raw materials alongside innovative proposals and unusual combinations. «The launch of Conad’s new Sapori&Idee line - says Francesco Avanzini, Conad General Manager - is in line with the principles of our work: the search for quality and long-lasting collaborations with our suppliers, with whom we share our same values. We’ll keep on working by seizing new challenges to provide customers with affordable innovation and high quality and the entire supply chain in which we operate with support and collaboration.»

TIER

TYPE OF PL

CUSTOMER CONVENIENCE PROPOSAL (ADVANTAGES FOR THE CUSTOMER) STRATEGIC GOAL (ADVANTAGE FOR THE RETAILER) MAIN EXAMPLES

TIERS BASED ON PRICES (good, better, best) Lowest Price

Cheap Quality suitable for the price Reist discounters and killer category Hill Country Fare (HEB); Farm brands (Tesco, fresh categories); Frescampo (Exito); Despar Budget

Mainstream

Generic Quality equal to or higher than the leading brand but at lower prices Create a critical mass to reinforce the brand message Great Value (Walmart);Up & Up (Target); Quality GPA, Exito)

Premium

Special Best possible product with no savings Elevate brand image, increase profits Tesco Finest; Boots No. 7; 7-11 Premium; Coop Fior Fiore; Esselunga Top

Customer-First Brand

Lifestyle Brand Meets specific needs in wide category range Build customer loyalty and meet growing customers’ needs Simple Truth (Kroger); 365 Organic (Whole Foods); Tesco Free from, Taeq (Exito, GPA); Änglamark (Coop Noeway, Denmark, Sweden); Conad Alimentum or those who have specific dietary needs

Fantasy brand

Unique products at competitive prices Credibility in competitive categories, differentiated products in specialized markets Aldi; Lidl; Chockablock, Parioli (Tesco); Lidl’s Cien for personal hygiene

Private Label according to Bennet

u High added value Bennet lines -Selezione Gourmet Bennet, Bennet Bio, Bennet Eco, ViviSì- are at the core of important numerical development supported by suitable promotional plans. «Among our premium lines, the most performing one is ‘Selezione Gourmet’- they claim.- In 2020 it achieved 20 million euros, a remarkable, compared to last year, which 15% of our private label share». Also, the Bennet product range, sustainable-certified, is increasingly growing (+9%), responding to the needs of those who are more and more concerned with planet health. «The company strategy is moving towards increasing its sustainable product range, including those with FCS, UTZ and Bio brands. Similarly, the company places great value on product origin, favoring those coming from the area where hypermarkets are located. From this, in 2020, the project Filiera Valore Bennet was born, with the aim of tracking the product journey from farm to table». At present, the Italian large-scale distribution chain is focusing on the meat and fish category and it will extend the project to other sectors.

CARREFOUR STRIVING FOR ITALIAN SPIRIT IPLS’s research study showed that in some cases Regional and Premium products are combined under the same brand, such as Coop’s Fior Fiore, Sigma’s Scelto and Esselunga’s Top. For over 20 years, Carrefour Italia’s Terre d’Italia line has aimed at enhancing Italian regional excellence, while promoting a wide range of traditional products with the collaboration of small and medium producers. From 2019, some references of the line are FDAI - Firmato Dagli Agricoltori Italiani - certified thanks to a partnership agreement signed by the company with Coldiretti and Filiera Agricola Italiana. The collaboration is aimed at tracking food products throughout the supply chain, supporting its local identity, biodiversity development, as well as, safeguarding consumers’ rights. This collaboration also allows Italian producers to have real opportunities of internationalization. In 2020 alone, the company exported 175 private labeled products to France, Belgium, Poland, Romania, Dubai, China, Taiwan, among which 88 of Terre d’Italia line, for a value of 1,540,000 euros. «Projects convey Carrefour’s actual commitment toward promoting more sustainable and responsible food systems that can generate value for local communities. This is the philosophy behind our ‘Act for Food’ strategy, which aims at ensuring Food Transition for everyone through concrete steps,» explains Gilles Ballot, Carrefour Italia Merchandise, Marketing and E-commerce Director. Together with Terre d’Italia, Carrefour also features Filiera Qualità, their basic meat, fish, fruit and vegetables line of products, which encompasses over 8,000 among small and medium agricultural enterprises and cattle farms all over Italy. Through their Carrefour Bio line, instead, the retailer developed 389 references with the aim of making their organic products even more affordable.

Maria Teresa Manuelli