PRIVATE LABEL INTERNATIONAL: FALL 2017 by ensembleiq

PLUS Vegan trend Condiments Sauces Frozen foods Paper products

R E T A I L E R

O F

T H E

Y E A R

Sticking Basics to the

Aldi Southâ&#x20AC;&#x2122;s modest approach, low prices and quality private label products have made it a mainstay in Germany and other parts of Europe

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Contents

10 20

FEATURES

REGULARS

Cover Story

Point of View

Market Report

Aldi South: Sticking to the basics

Consumer Trends 16

Vegan food trend takes root in Europe

27 Trend Watch

Condiments

20 Add some pizzazz

Sauces and Marinades 22 A closer look

Frozen Foods

About the Cover

Household Paper Products

Aldi Southâ&#x20AC;&#x2122;s modest approach has made it a mainstay in Germany and elsewhere in Europe. Cover design by Jeff Bowes. Photo courtesy of Aldi South.

25 In with the new 26 Take it up a notch

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POINT OF VIEW l

F AL L 2 0 17

VO LUME 3 3

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Contributing Writers

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EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION

CORPORATE OFFICERS Executive Chairman Chief Operating Officer Chief Brand Officer Chief Financial Officer Chief Business Development Officer & President, Ensemble IQ Canada President of Enterprise Solutions/ Chief Customer Officer Chief Digital Officer Chief Human Resources Officer

Alan Glass Richard Rivera Jeff Greisch

More than just low prices In 2011, when Aldi opened up shop in New York City, the New York Times wrote this about the Mulheim, Germany-based retailer, “The company capitalizes on the bargain hunter, who is not embarrassed to choose frugality over name brands.” That’s exactly how I felt about shopping at Aldi when I first began shopping at the deep-discount chain about seven years ago in the U.S. And, I must admit, even though I’m a bargain hunter with the best of them, I was skeptical of Aldi’s assortment. I had it in my mind that low-cost products packaged in brands I had never heard of might equal second-rate products. A few years later my thought process has changed. I still love Aldi’s low prices, but I’m equally impressed with Aldi’s quality of assortment, not to mention its exclusivity and personalization — all things I’ve noticed that have been improved upon. In the United States, Aldi U.S. is owned and operated by Aldi South, Private Label International’s Retailer of the Year (see page 10). Aldi was founded by brothers Karl and Theo Albrecht in 1946 after they took over their mother’s store in Essen, Germany, which had been in operation since 1913. The two brothers split the company in two in 1961, with Karl overseeing Aldi South’s operations. From the beginning, Karl stressed that Aldi offer low prices because it offered a limited selection of groceries and had to find a way to get customers into stores. Low prices were a necessity, Karl said. For this month’s cover story, I interviewed an Aldi associate who mentioned — over and over — the quality, exclusivity and personalization factors that Aldi is bringing to today’s market place. Clearly, Aldi does not just want to be known as a low-cost grocery provider. I can vouch for that. I no longer just go to Aldi for its low prices; I go there to purchase quality and innovative products. Often, I’ll go to Aldi for a handful of items that I can’t get at other area retailers, specifically Aldi’s liveGfree Sweet Chili Brown Rice Chips (1.40 €) and Little Salad Bar Spicy Guacomole (2.49 € for 14 ounces). Funny story, not long ago my spouse was shopping at the local Aldi when she saw someone she knew from our town — someone on the hoity-toity side who would be embarrassed to choose frugality over name brands. When my wife returned home, she told me she saw this person while shopping, remarking that this person was probably horrified to be seen by her at a deep-discount store like Aldi. But I’m going to give our hoity-toity acquaintance the benefit of the doubt. I’m betting she was at Aldi for more than just the low prices.

Len Farrell Korry Stagnito Ned Bardic

Lawrence Aylward, Editor-in-Chief laylward@ensembleiq.com

Joel Hughes Greg Flores

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Introducing What is happening in private label in Europe? PLMA has the answer for you every month when you watch PLMALive.eu. It is video news magazine that keeps you on top of retail and industry trends, events and company strategy. Join news anchors Judith Kolenburg and Edgar Elzerman for insight and understanding. Plus, exclusive reports on technology from Pascal Kuipers, new product tasting from Chef Berry Pronk, and industry headlines from Veronica Carvalho. Broadcast in English, French, German, Spanish and Italian, PLMALive.eu is streamed to your desktop, laptop, tablet or smartphone. Here are some of the stories we are following now.

The impact of Amazon’s purchase of Whole Foods

Retailing in India

Safety of Europe’s food supply

A visit to a new kind of store

All-vegan supermarkets

The new concept of Blockchain

Visit www.plmalive.eu On your desktop, laptop, tablet and smartphone Presented by the Private Label Manufacturers Association International Council World Trade Center, Strawinskylaan 1873, NL-1077 XX Amsterdam, The Netherlands • Telephone: +31 20 5753032 Email: plmalive@plma.nl

MARKET REPORT

Industry Update

Report: Private label in Europe to grow 6.9 per cent through 2021 Line extensions, product innovations lead to more consumers The private label food and beverages market in Europe is expected to grow at a compound annual growth rate of 6.9 per cent from now until 2021, according to “Private-label Food and Beverage Market in Europe 2017-2021,” a report from Research and Markets, a Dublin-based research firm. One trend in the market is product-line extension, according to the report. Retailers are concentrating on the diversification of their product portfolios. In the food and beverage category, retailers are extending their private label product lines to attract more customers. The report also said that retailers that did not offer private label food and beverage products earlier are now showing interest in entering the market. Another driver in market growth is a rise in product innovations, the report said. “The food and beverage market is growing steadily as customers’ demands and choic-

es are changing very rapidly,” according to the report. “The major brands in the grocery retail market are not very different in terms of quality from premium private labels. However, the major national and international brands are priced slightly higher. Retailers aim to introduce technologi-

cally advanced products in terms of premium quality and packaging of private label food and beverages, to satisfy the requirements of the customers.” The report stated that one challenge in the market is an increase in safety concerns. Many retailers offer their own private label products in the food and beverage category, but some of them have failed to keep up with the latest technologies and innovations. “Customers still think that national or other established food and beverages brands are safer to consume than private label brands,” the report said. “To attract mass customers, some retailers compromise on the quality of private label food and beverages to provide lowpriced products.” In related news, the Private Label Manufacturers Association, citing Nielsen research, said that market share for retailer brands climbed to all-time highs in nine European countries in 2016 and for the first time stands at 30 per cent or above in 17 of the 20 countries tracked for PLMA’s International Private Label Yearbook (see Trend Watch on page 30).

Private label driving olive oil sales in Western Europe Olive oil sales, thanks in part to private label, are on the rise in Europe, according to a report in the Olive Oil Times. The increase is despite production challenges over the past few years and the economic fallout from Britain leaving the European Union. Private label trade has contributed significantly to the €6.9 million increase in olive oil sales in Western Europe from May 2016 through May 2017, according to Olive Oil Times, citing data from market research firm IRI. The UK saw a 5 per cent increase in demand and volume sales while Germany saw a demand increase of 10.8 per cent, IRI reported. “A notable exception occurred in Greece, where retailer Marinopoulos filed for bank-

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ruptcy, pulling its popular private label range off the market, forcing consumers to seek alternative brands,” Olive Oil Times reported. While the growth in private label has led to greater overall sales of olive oil, there have been price increases. “Poor weather conditions over the past few harvests have created problems for Europe’s biggest olive producers, decreasing yields and increasing the demand for what little there is to go around. Spain recently experienced its worst olive harvest in two decades, while Italy has had to cull over a million olive trees due to the deadly Xylella fastidiosa bacterial outbreaks,” according to the Olive Oil Times

Carrefour opening in Brazil French retailer Carrefour is opening its first hypermarket store in São Paulo, Brazil. The store is more than 5,600 square metres in size, and features a range of around 34,000 products, with a special emphasis on private label and fresh produce, according to European Supermarket Magazine. It will feature a bakery, rotisserie, butcher’s counter, wine cellar, home and electronics store, pharmacy, and a fresh market with more than 900 types of fruits and vegetables. Carrefour stated in European Supermarket Magazine that customers will have “the experience of being in several specialty stores, but with the convenience of buying everything they need in one place.” Carrefour is one of the largest hypermarket

chains in the world, with nearly 1,500 stores. It operates in more than 30 countries.

Four key trends in the French discounter market that could impact private label While France hasn’t been known as a discount market for food and grocery, there has been an increased amount of investment into new discount store concepts across the country, according to the IGD, the international grocery research organization based in the UK. IGD’s Head of Discount and Council for Economic Education Milos Ryba said four key trends are shaping the grocery market in France where discounters can meet more shopper needs as they develop and evolve in a multichannel world. They are: Organic opportunities With an increasing number of organic products appearing on the shelves in France, it is clearly a significant opportunity, Ryba said. While some discounters are addressing the growing organic trend in France, suppliers can play a more proactive role in helping them meet the food-to-go and reformulation trends which have been implemented successfully in other markets by discount retailers. Linking to well-being will be key to seeing the benefit, Ryba added.

Food to go in demand Food to go is growing in France, and discounters are also tapping into this fastgrowing opportunity, Ryba — Milos Ryba said. Innovations such as IGD’s Head of Discount sushi bars or chilled boxes and Council for are areas already successEconomic Education fully adopted in other markets which could be well-received in France. More and more retailers are launching their own food-togo private ranges. Health trends equal reformulation As health and well-being becomes a more significant priority for shoppers, expect to see more discounters working to improve health credentials, Ryba noted. Reformulation at discounters is also driven by private label, which means it is an opportunity for suppliers of private label products and a challenge for brands to remain competitive. Digital solutions The online channel in France is growing, Ryba said. As a result, retailers are focusing on winning by expanding through new and modern online and digital solutions. Online is a channel which leading discounters are exploring and looking for cost-efficient online models. “It is important for discount players and their suppliers to understand the current grocery trends in France to be able to adapt the offer better to the French shopper and their changing needs,” Ryba added. FALL 2017

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MARKET REPORT

Update

Philippines will grow to fifth-largest grocery retail market in Asia IGD predicts 9.3 per cent year-on-year growth through 2021

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The grocery retail market in the Philippines is forecast to grow on average 9.3 per cent year-on-year between now and 2021, which will make it the fifthlargest grocery retail market in Asia, according to IGD, the international grocery research organization based in the UK. For the first time ever, the country is expected to move up from sixth place to become the fifth-largest grocery retail market in Asia, after China, India, Japan and Indonesia. The growth will be driven by a growing population, strong domestic consumption and a buoyant economy, according to IGD. “The Philippines is an exciting market to watch,” said Shirley Zhu, programme director for IGD’s Asia-Pacific research. “Modern trade currently accounts for about 20 per cent of total grocery retail sales and is growing rapidly. We expect to see fast growth in both the number of outlets and sales for modern grocery retailers.” Domestic multi-format retailers dominate modern trade and have shown robust growth over the last five years, with SM Retail, Puregold and Robinsons the largest grocery retailers in the country. SM Retail, for example, is focusing on expanding its mid-sized and small format stores. In 2016, the retailer opened 144 stores, only one of which was a hypermarket, while 111 opened under the Alfamart minimarket fascia, through a joint venture with Indonesia-based PT Sumber Alfaria Trijaya. SM Retail continues to expand beyond Metro Manila; in 2016, 80 per cent of its store openings were outside this area. Meanwhile, Puregold and Robinsons share a similar ambition to expand further beyond the Luzon area with their multi-channel strategies. 7-Eleven, the fastest-growing retailer in the Philippines according to IGD data, is also expanding its stores into smaller towns across the nation.

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COVER STORY

By Lawrence Aylward

Sticking Basics to the

Aldi South’s modest approach, low prices and quality private label products have made it a mainstay in Germany and other parts of Europe Aldi South, a historic leader in Germany’s private label grocery industry with roots dating back to 1913, continues to spur store brand market share growth in Europe. In fact, market share for private label in Germany has never been higher. According to Nielsen data, retailers’ store brands in Germany reached an all-time high in market share in 2016, up 2.1 per cent from the previous year to 45 per cent market share. No doubt that Mulheim, Germany-based Aldi South, with nearly 1,900 stores in south and west Germany, is partly responsible for the growth. And Aldi South has generated that growth by sticking to a basic plan. “ALDI made history in Germany with its philosophy of concentrating on the essentials,” says Kirsten Geß, director of communications for Aldi South. “From the very beginning, the product range focused on private label as it is private label that allows us to offer high-quality products at a great value.”

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For Aldi South’s history of offering a limited assortment of mostly private label products at a great value, it is Private Label International magazine’s 2017 Retailer of the Year. EXCELLING IN MODESTY Aldi was founded by brothers Karl and Theo Albrecht in 1946 after they took over their mother’s store in Essen, Germany, which had been in operation since 1913. The two brothers split the company in two in 1961 over, reportedly, a disagreement on whether to sell cigarettes. (Karl did not want to sell them but Theo did.) The companies since developed into Aldi South and Aldi North, with Karl overseeing Aldi South’s operations. While the two groups have remained related by family ties, they are legally and economically independent of each other and operate outside of Germany in different countries. In his book “Bare Essentials: The Aldi Way to

Aldi South continuously aims to be different and exclusive by being sensitive to current trends and considering consumers’ needs.

Retail Success,” Dieter Brandes, a former Aldi executive, writes that “Aldi has always excelled in modesty, and this attitude is appropriate for the most important part of the company, its stores.” Aldi offers far fewer SKUs than typical grocers. Its stores are smaller and are hardly extravagant. In his book, Brandes quotes Karl, who died in 2014 at 94, as saying, “Since 1950 we have been adhering to the principle of low prices as well as that of limited selection. This was also a matter of necessity. If we did not want to offer customers a wide range of products, then we had at least to offer them some other advantage. From that point on we sold our products for decisively less. I am convinced that these two principles, narrow product range and low price, cannot be separated.” Aldi South operates more than 5,300 stores and 81 distribution centres in nine countries; besides Germany, those countries include Austria, Switzerland, Slovenia, Hungary, the United Kingdom,

Ireland, the United States and Australia. With 104,400 employees, Aldi South generated net sales of 45.5 billion euros in 2015. In the U.S., Aldi South is ramping up its presence. It announced in June that it would expand from 1,600 to 2,500 stores nationwide by the end of 2022. Aldi South, which focuses on food products and other daily necessities, offers between 1,200 and 1,500 core products as well as 30 to 90 “special buy” products per week. Aldi South says its store brands “form the heart of our range.” Its private brands include Almare (seafood), Alpenmark (cheese), Amaroy Premium Rostkaffee (coffee), BBQ Zeit Zum Grillen (meat and poultry), bio (organic foods), Cucina (Italian cuisine), Desira (milk products and desserts), Mamia (diapers and baby care products), Tandil (laundry detergent) and several others. Geß says the success of Aldi South’s private label products is based on consistency of high quality and low price. FALL 2017

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COVER STORY

Retailer of the Year

Aldi South’s legacy is rooted in providing the essentials to consumers.

“That is the fundamental strength of private labels,” she adds. “Many private labels have been bought by our customers for generations and therefore enjoy a high level of trust. They are well-established among our customers, and their high level of recognisability makes them stand out.” QUALITY FIRST Geß says Aldi South’s modest structure provides the retailer with the flexibility to respond quickly to current trends and changing consumer demands. For example, when vegetarian and vegan foods gained in popularity, the retailer was quickly able to add private

label products in the category to its assortment. But being fast to market is not the most important factor regarding private brands, Geß stresses. “The most important thing to remember is to always put quality first,” she adds. “This is the only way of maintaining our customers’ trust.” Geß says Aldi South aims to be different and exclusive by being sensitive to current trends and considering customer wants and needs. “Under the well-known umbrella of our private labels, we have the opportunity to identify new trends and adapt the recipes of our private labels accordingly,” she adds. “Finally, our private labels are characterised by their exclusivity since they are only available at Aldi South.” Geß says the retailer reviews its product range at regular intervals in order to provide its customers with the best possible product assortment, which might even include high-quality exclusive products such as salmon and champagne. Aldi South has embraced exclusivity by offering limited-time experiences to drive deeper consumer engagement. An example of that is Aldi South’s PopUp Bistro concept, where shoppers can enjoy chefprepared meals.

ALDI SOUTH AT A GLANCE • Aldi was founded by brothers Karl and Theo Albrecht in 1946 after they took over their mother’s store in Essen, Germany. The two brothers split the company in two in 1961, with Karl leading Aldi South’s operations. • Based in Mulheim, Germany, Aldi South has “made history with its philosophy of concentrating on the essentials.” • Aldi South operates nearly 1,900 stores in south and west Germany. • Aldi South operates a total of more than 5,300 stores and 81 distribution centres in nine countries; besides Germany, those countries include Austria, Switzerland, Slovenia, Hungary, the United Kingdom, Ireland, the United States and Australia. • Aldi South offers between 1,200 and 1,500 core products as well as 30 to 90 “special buy” products per week. • Aldi South’s private label brands include Almare (seafood), Alpenmark (cheese), Amaroy Premium Rostkaffee (coffee), BBQ Zeit Zum Grillen (meat and poultry), bio (organic foods), Cucina (Italian cuisine), Desira (milk products and desserts), Mamia (diapers and baby care products), Tandil (laundry detergent) and other several others. • Aldi South has embraced exclusivity by offering limited-time experiences such as its Pop-Up Bistro concept, where shoppers can enjoy chef-prepared meals at various locations. • In 2015, Aldi South introduced electric car-charging points and installed photovoltaic systems on the majority of its store roofs.

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COVER STORY

Retailer of the Year

(Left) Passing on savings to customers is an Aldi South mainstay. (Above) The retailer is currently modernising stores while keeping a close eye on product range.

“Our Aldi Bistro has been extremely popular,” Geß says, noting that 350 to 450 people come to the bistro daily when it is offered. “The Aldi Bistro aims to further highlight our core competencies in the areas of freshness and quality. We therefore only use products from our product range to prepare the meals at the Aldi Bistro.” The Aldi Bistro is a part of the retailer’s “Simple is

more” marketing campaign and is aimed at improving customer loyalty. “The extremely positive response to this venture shows that we have definitely achieved this goal by introducing the Aldi Bistro,” Geß says. GAINING LOYALTY Aldi South is able to buy in bulk, another reason it

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can offer quality products at low prices, Geß says. “We pass on our savings directly to our customers wherever possible,” she adds. “This principle of permanently and consistently offering high quality at low prices is the mainstay of our private label policy and encourages customers to become attached to our products in the long term and remain loyal to them.” Geß says Aldi’s private label program is built on long-term and trusted relationships with its suppliers. “Together with our suppliers, we develop new products and set our own high standards that often exceed legally required standards,” she adds. Aldi South has educated its consumers about the products in its private label assortment for many years by simply supplying them with leaflets that detail the products. The retailer also uses its website to promote its store brand assortment. “This May, we also launched an out-of-home campaign under the ‘Feared by leading brands’ slogan,” Geß says. “With this external campaign, we aim to further emphasise our competencies in the area of private labels and especially put the spotlight on our particularly popular products such as Veuve Monsigny champagne, our Moser Roth chocolate or our Tandil laundry detergent.” Aldi South offers a few select brand-name products in its assortment.

“We complement our product range with selected brand-name products that are very popular with consumers that must not be missing from any shopping list,” Geß says. “However, our product range continues to focus on private labels as they make up the majority of our product range.” Geß says the retailer focuses on transparency regarding the origin of its products and is dedicated to sustainability. “In 2015, we introduced electric car-charging points and installed photovoltaic systems on the majority of our store roofs, making us the first food retailer [in Germany] to be climate neutral,” she says. To keep improving means to keep growing alongside customers’ needs, Geß says. That includes currently modernising its stores while keeping a close eye on its product range. “Customer wishes, society and the resulting demands and requirements in the food retail sector evolve over the course of time,” she adds. “We keep an eye on these changes and adapt accordingly. We continuously strive to tailor our product range to the needs and wishes of our customers.” n Aylward, editor-in-chief of Private Label International, can be reached at laylward@ensembleiq.com.

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Wright notes that vegan ranges “offer a point of difference” for supermarket chains facing increased competition. The vegan private label products offered by European retailers include such items as vegetable-based entrées, rice milk and meatless “beef style” burgers. “There’s a lot of debate about whether vegan products should mimic meat or whether the products should be satisfying on their own,” points out Meredith Ford, client lead at London-based dunnhumby, which provides data science for retailers. She says that grocery retailers are wise to provide both private label meatsubstitute products — which are aimed more at new vegans and flexitarians — and vegan dishes that rejoice in the delicious, unique flavours and textures of vegetables, fruits and grains. But in creating own-label lines, retailers should not forget the many vegetarian and flexitarian consumers who eat dairy products, says Ed Perkins of UK-based Solutions for Retail Brands. “Dairy provides functional benefits as well as flavour and texture,” he notes. Still, vegan advocacy groups say that even or-

ganic dairy farms can be inhumane, often keeping cows in crowded sheds, artificially impregnating them yearly and taking their calves away after birth. “The Vegan Society’s vision is a world in which humans do not exploit other animals,” Piasecka says. “Realistically, the world will move towards the vegan lifestyle gradually. And as it does, the demand for animal products will decrease, which will in turn lower the supply. Farmers will gradually move from farming animals to growing crops for human consumption.” Although this scenario is a long way off, European grocery retailers are gearing up for the escalating interest in vegan foods and beverages. “In the same manner in which free-from is a growing trend, I think the most important thing is that retailers continue to offer customers choice,” Perkins says, noting that on-pack labelling and in-store signposting are vitally important. “If retailers don’t produce lines that are explicitly vegan, then they at least should ensure that any vegan products that they carry are clearly labelled as such for customers to see.” n

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CONDIMENTS

Category Update

Add some pizzazz The merchandising of condiments with unique ingredients can trigger more private brand activity The condiment sector might be one of private label’s unsung bastions of opportunity. Because the category has a history of “little creativity,” variations in ingredients and merchandising can result in greater shopper interest and activity, says Diana Sheehan, director of retail insights for Kantar Retail, a Boston-based research and consulting firm. “Products need to stand out on shelves and be seen clearly as store brands while not mimicking the national brands,” Sheehan states. “There is room to explore new and innovative packaging along with flavors and ingredients, and that includes the development of more natural and organic private label offerings.” The global store brand condiment sector already is active. Combined 2016 sales of private label condiments, sauces and dressings totaled €4.5 billion in Western Europe, €2.9 billion in North America, €1.3 billion in the Asia-Pacific region, €334.7 million in Latin America and €120.5 million in the Middle East and Africa region, reports London-based Euromonitor International Ltd. Yet, the prospects for greater private label activity is strong with many consumers around the globe having favourable feelings about store brands, notes Jordan Rost, vice president of consumer insights at The Nielsen Co., a New Yorkbased market research firm. “The strongest success is coming in commodity driven, high-purchase categories and those where consumers perceive little differentiation,” he says. “Retail consolidation and the expansion of the dis-

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count grocery format are key drivers for store brand growth in developed markets such as Europe.” Retailers also are likely to generate additional store brand activity by marketing private label products that differ in quality from the national brands, says Doug Baker, vice president of industry relations for the Washington, D.C.-based Food Marketing Institute (FMI). GO YOUR OWN WAY “Price gets the product off the shelf, but performance gets the shopper to buy it a second time,” Baker says. “There always is a segment in every society that shops by price and whose needs are putting food on the table. But retailers don’t have to be ‘fast followers’ with private brands anymore. They have been given permission by the consumer to focus on their needs and not just be a low-price alternative to the national brands.”

By Rich Mitchell

Indeed, many shoppers are seeking condiments with unique ingredients, says Agron Kosova, manager of Fine Italian Food, a Naperville, Illinois-based supplier of oils and vinegars. “Some consumer segments, such as millennials, want to eat healthier and they are looking for foods that are organic or non-GMO and have clean labels without chemicals,” he notes. Because many retailers, however, are not focusing on ways to bolster condiment sales, it remains a category that is ripe for expansion, Kosova states. “Retailers can offer products that are higher quality, have better prices and offer more variety than the national brands,” he says. Leveraging potent merchandising strategies also can trigger additional activity, Baker states, noting that tactics could include simulating the methods that have been successful in foreign markets. Because of strong store brand penetration in Europe, for instance, retailers will benefit by studying actions in different countries and tailoring the processes to their own environments, he notes. “European consumers were first to accept clean labels and

that’s something other retailers can learn from,” Baker says. “We also are learning that it is OK for retailers to move beyond being fast followers of national brands. Consumers in such countries as Italy, Denmark and Spain are among those who are accepting of products that did not follow the same path as the national brands.” In addition, a close working relationship among retailers and their suppliers can lead to the development of innovative products and effective sales strategies, he states. “The trading partner has insights specific to the category,” Baker says. “Suppliers with an assortment of retailer customers have visibility on how the products sell to different demographics, in different regions and in different store formats.” GIVE THEM WHAT THEY WANT To enhance the appeal of products, it is important that retailers spotlight the most pertinent features on packaging labels and other promotional vehicles, Baker says. “Messages also should correspond to a retailer’s merchandising strategy, such as by focusing on price for value-oriented products,” he notes. “But it is important to be as descriptive as possible on labels. The days of creating labels that look like those of the national brands have passed.” Baker says consumers do not need to be tricked into thinking that the store brand tastes like the national brand. “It is not a requirement by the shopper anymore,” he adds. Among the key challenges facing condiment merchandisers, meanwhile, is determining the optimal amount of private label and national brands that stores should display. Such balancing will typically vary at each retail outlet in accordance with the needs and preferences of the specific shopper bases. “Many retailers actually over-emphasize their store brands from a merchandising perspective,” Sheehan says. Private label merchandisers, however, are in a strong position to generate added activity for their condiments because it is easy to situate products in different areas of the store, Kosova states. “Retailers can display the store brands on condiment shelves, in the bakery and cheese areas and even the produce section,” he says. “Condiments also can be part of a passive in-store demo that includes crackers or bread.” Educating consumers on the attributes of private label condiments also can trigger greater sales within specific shopper segments who may have negative perceptions of store brands, Kosova states. n FALL 2017

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SAUCES AND MARINADES

Category Update

A closer look As more consumers scrutinize contents of sauces and marinades, retailers have a greater opportunity to separate their store brands from the competition The international sauce market is surging. Worldwide consumption of table sauce totaled an estimated 10.9 million tons in 2016, an increase of about 3 per cent from a year earlier and similar to the growth rates in each of the past five years, reports market research firm Mintel in its January 2017 “Table Sauce, Seasoning and Sweeteners Global Annual Review.” Though the greatest percentage increases are from emerging Asian economies, there also was expansion in the majority of mature markets, including the United States, Russia, China, Germany, Mexico, Australia, Poland and Canada. Among the 10 largest markets, only the United Kingdom did not register growth in 2016. Contributing to volume increases, particularly in Europe and North America, is suppliers promising extra care in production or claiming that their recipes are free of allergens or other “nasty stuff,” Mintel states. Indeed, more than 20 per cent of table sauce launches in 2016 featured a “no additive or preservative” message and “low-allergen” claim, with the majority of rollouts also having “gluten-free” statements, Mintel reports. Such initiatives are in step with the greater shopper interest in healthy eating. More than onethird of Italians under age 34, for instance, express interest in organic sauces, Mintel notes, while GMO-free claims attract about 25 per cent of Polish sauce buyers. “Consumer concerns over ingredient transparency are shaping innovations in the table sauce and

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seasoning segments, with scrutiny focusing on products made with simple and easy-to-understand ingredients,” Mintel states. “In Asian markets, where food safety often has a poor record, specific natural claims are often linked with addedvalue products.” Health-oriented messages, meanwhile, also are helping to brighten shoppers’ attitudes toward products. Approximately half of all Chinese consumers between the ages of 20 and 49, for instance, associate organic and GMO-free claims with premium sauces, Mintel notes. A PAYBACK FOR PREMIUM Selections that shoppers perceive as value-added also can generate added revenues for retailers, notes Laura Pergolizzi, product manager of food and beverage for LiDestri Inc., a Rochester, New

By Rich Mitchell

York-based sauce supplier. “Consumers are willing to pay more for premium sauces and marinades,” she states. “There is a greater interest in products that have cleaner ingredient statements and less processing.” Shoppers also are focusing more on ingredient varietals, such as the type of tomatoes in sauces; if the items are imported or grown locally; and how the products are cooked and processed, she notes. “It is important to understand what claims are going to resonate with the consumer and then develop the right selections,” Pergolizzi says. “There is a shift in private label to more premium and organic sauces and marinades. The products represent a very small sector share, yet their growth and contribution to the category are disproportionate to segment size.” To offer the optimal sauces and marinades to their specific customer bases, retailers must be clear on company goals and have candid discussions with suppliers on their merchandising objectives, she states. “Retailers may not be able to make quality claims if they just want to offer products at the low-

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SAUCES AND MARINADES

est prices,” Pergolizzi notes. “It is critical that there is good dialogue between the retailer and the private label manufacturer to ensure that the supplier develops products that meet the retailer’s plans with the price point the retailer is looking for.” To generate additional interest in store brands, Pergolizzi says it is important to encourage shoppers to sample products. Techniques include advertisements and the use of such promotional vehicles as attractive displays, temporary price reductions and in-store samplings, she notes. While it also is advantageous for retailers to have multiple store brand product tiers to attract a broader range of shoppers — such as value, mainstream and organic selections — most consumers still purchase basic flavours, she notes. As a result, retailers should have a “solid core store brand offering that satisfies the routine needs of their consumers because that is where they are going to get the biggest return on their investment,” Pergolizzi states. CALL TO ACTION Other effective merchandising techniques include situating chilled sauces adjacent to fresh produce, Mintel reports.

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Category Update A September 2016 Mintel survey of U.K. consumers found that 36 per cent of persons with an income of at least £75,000 expressed interest in fresh table sauces and dressings sold chilled, compared to 25 per cent for persons with an income of between £15,500 and £74,999. The lowest interest was from persons with incomes between £9,500 and £15,499 (17 per cent) and under £9,500 (18 per cent).

About half of all Chinese consumers between the ages of 20 and 49 associate organic and GMO-free claims with premium sauces, according to Mintel. The 1,830 respondents were Internet users ages 16 and older who had bought condiments and dressings in the previous six months. “Chilled sauces may well offer the potential to drive added value, as appeal is strongest among more affluent households,” Mintel notes. Sauce packaging also is evolving with a 2 per cent increase in 2016 in the number of

launches featuring table sauces in jars or bottles and fewer sauce rollouts in flexible packaging formats, Mintel states. “Features such as improved freshness, ease of storage or multiportions can all offer added-value benefits to consumers and can help sway decisions at the point of purchase,” Mintel adds. Retailers can further bolster sales of store branded sauces and marinades by responding to the interests of Generation X shoppers, many of whom are in their 30s and 40s and are often seeking items with higher-quality ingredients, states Brian Sharoff, president of the New York City-based Private Label Manufacturers Association (PLMA). “In countries like England, Germany and France, it is a question of which of the major retailers can adapt to the new ways that people under the age of 45 shop,” he states. “Generation X is where the focus should be. And what is amazing is how few retailers and manufacturers seem to appreciate the impact that the group is making the marketplace, not millennials and baby boomers.” Such consumers, for instance, are more likely to purchase premium sauces and marinades than other shopper segments, Sharoff notes, adding, however, that their interest in store brands is typically because the items are comparable or better than the national brand alternatives and not because of a “premium” stigma. “Generation X shoppers buy store brands of higher quality and often patronize the better retailers,” he says. “They are not people on low budgets who are struggling to survive and desperately need black and white generic products. They are a very successful part of the culture in Europe, Asia and the United States. Millennials in Europe and Asia will have little or no effect on what takes place in the store.” n

FROZEN FOODS

By Rich Mitchell

In with the new Retailers offering innovative, health-oriented private label frozen foods are in position to bolster own-brand activity The global private label frozen food market is heating up. Activity in many European countries is increasing — along with store brand penetration rates — as retailers roll out new selections and shoppers gain a more positive perception of the category. Spain in 2016 had a frozen food private label market share of more than 68 per cent, a 19 per cent increase from 2012, reports the New York-based Private Label Manufacturers Association (PLMA). Activity also is strong in Austria, with a 60.4 per cent frozen food share last year and a 53.7 per cent gain from 2012; Hungry, a 59.3 per cent share and 14 per cent increase; the Czech Republic, with a 47 per cent share, up 27 per cent; and Sweden, with a 36.5 per cent share and a 17 per cent increase. Growing shopper and supplier interest in the prepared foods sector, meanwhile, is creating additional expansion opportunities for store brands. Indeed, frozen offerings accounted for 59 per cent of product introductions in the prepared meals category in 2016, reports market research firm Mintel in its recent “Prepared Meals & Pizza Global Annual Review.” In addition to prepared meals and pizza, the category includes pastry dishes, meal kits, sandwiches, wraps and salads. Retailers seeking to bolster prepared foods activity will benefit by meeting the greater consumer demand for healthy options with cleaner labels, Mintel reports, noting that “no additives/ preservatives” is one of the fast-

est-growing claims in the China ready-meals category. ORGANIC IS ON THE RISE “More than ever, consumers are concerned with the specific production and ingredient details of the foods that they purchase,” Mintel states. “As a result of rising concerns surrounding food production and processing, consumer demand for organic food products continued to grow in 2016.” Brazil’s organic market value, for instance, was projected to increase more than 30 per cent in 2016, Mintel notes. “The growth in retailer brands will come in sectors where there is not a ton of national brand presence, and that includes organic, where store brands are growing significantly faster than in other segments,” says Jim Wisner, president of Wisner Marketing Group, a Libertyville, Illinois-based food and consumer packaged goods consulting, research and education firm. Retailers, meanwhile, are in position to make frozen private label items more eye-catching and appealing by pairing selections

Category Update

with other foods and beverages in stores while catering to consumer demands for quick, easy and healthy meal solutions, says Julie Henderson, vice president with the Harrisburg, Pennsylvania.-based National Frozen & Refrigerated Foods Association (NFRA). Packaging options that emphasize innovation and sustainability by using less material and offering greater hardiness also will become more pertinent, says a spokesperson for Emilia Foods, a Maranello, Italy-based producer of frozen Italian gourmet entrées, pizza, gelato and vegetables. While demand for specific frozen products varies in accordance with the geographic, political and cultural characteristics of a region, retailers can better pinpoint the optimal store brands to merchandise in particular locations by soliciting input from their suppliers and capitalizing on the manufacturers’ strengths, the Emilia Foods’ spokesperson says. Upcoming frozen food launches, meanwhile, will likely include additional products that accentuate health and wellness, the Emilia Foods spokesperson adds. “A deep attention to nutritional benefits will be essential,” she says. “Customers are becoming more aware of what they eat. Paying attention to the new customers’ requests ... will be the keystone to stay on the market and evolve with it.” n

FALL 2017

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HOUSEHOLD PAPER PRODUCTS

Category Update

Take it up a notch

Seasonal items and sustainability attributes could help retailers grow private brands The international market for household paper products — including toilet tissue, facial tissue, paper towels and paper napkins — is generally mature. Western Europe, in particular, is facing challenges here. Market saturation and slow economic and population growth combined to create fierce price competition in 2016, Miles Agbanrin, an analyst with London-based Euromonitor International, reports in his analysis of the region. Within the region, Turkey demonstrates the greatest potential for growth in per-capita tissue consumption, Agbanrin notes. Ireland, meanwhile, leads in per-capita tissue consumption followed closely by the UK and Austria. PRIVATE LABEL DOMINATES The good news for retailers? Private label achieved positive growth in 2016 and continues to dominate in the region. “As share of total tissue volumes, private label held steady at 55 per cent of sales in 2016,” Agbanrin reports. Private label’s high share of the category in Europe can be attributed, in part, to a model that differs from that of the United States. “The U.S. model is based on the fast-follower concept by retailers and suppliers, due to national brands’ market share,” explains Marc Robinson, vice president of business development for Global Tissue Group Inc. in Medford, New York. “In Europe, store brands are the dominant brand choice by consumers, due to quality/price and better retailer understanding of both the value — margin — of their brand and consumer acceptance.” In the UK, private label ac-

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counted for 49 per cent of new product launches in 2016, notes global market research firm Mintel in its February “Household Paper Products — UK” report. The most active private brand here was Waitrose, which launched a number of products under its eco-minded Waitrose ECOlogical brand. The products are made from 100 per cent recycled paper. OPPORTUNITIES KNOCK Speaking of eco-minded choices, European consumers are now more aware than ever of how their paper-product usage impacts the environment, says Anne-Françoise Ravalet, a business and category insights manager for Stamford, Connecticut-based Daymon, who is based in Portugal. Therefore, products featuring recycled material and other sustainabilityminded attributes could spell private label opportunity for retailers. But they still might need to find a way to convince shoppers to buy such products. In the UK, for example, 32 per cent of household paper buyers/users believe recycled paper is of a lower quality than standard paper, according to Mintel. Seasonal products also present a continuing growth avenue. “Brands across all paper categories follow seasonal trends in Europe to create original products and packaging,” Ravalet notes. “This is executed by offering limited-edition products or making packaging that is representative of a

By Kathie Canning

holiday, for example. By providing these kinds of products and packages, brands can connect with consumers on an emotional level.” Some retailers recently got creative on the Christmas holiday front. In 2016, for instance, Tesco launched Tesco luxury soft toilet tissue in a Mulled Spice scent. And Waitrose debuted Waitrose Christmas extra soft bathroom tissue. Both products sport an on-paper festive design. Premium paper products also are trending within Europe, Robinson notes, but economic conditions have spurred growth in economytype products, too. LOOKING AHEAD Although the household paper products market is mature in Europe — and in many other regions — retailers still have an opportunity to grow own-brand share here. “The most successful grocery retailers have taken a store brand approach to ensure their brand is the one that brings consumers into the brick and mortar environment,” Robinson stresses. “The direction must be an all-in approach by retailers to protect and grow own-brand paper, with fewer secondary brands and a mix which helps the consumer in their buying decisions [at] the shelf.” n

TREND WATCH

Private label market share escalates in Europe The popularity of private label keeps growing across Europe, according to recent Nielsen data. Market share for retailer brands climbed to all-time highs in nine European countries and for the first time stands at 30 per cent or above in 15 of the20 countries tracked for the Private Label Manufacturer Association’s (PLMA) International Private Label Yearbook.

PRIVATE LABEL MARKET SHARE REACHED ALL-TIME HIGHS IN: n Germany n Italy n The Netherlands n Belgium n Poland n Austria n Sweden n Norway n Denmark

SEVEN COUNTRIES NOW HAVE MARKET SHARE OF 40 PER CENT OR HIGHER: n United Kingdom n Germany n Austria n Belgium n Switzerland n Spain n Portugal

THE BIGGEST MARKET SHARE INCREASES WERE POSTED IN: n Austria, up 2.8 points to 43 per cent

2015

n Germany, up 2.1 points to 45 per cent

2015 2016

n Poland, up 1.4 points to 30 per cent

2015 2016

2016

43% 45% 30%

OTHER NOTES:

“The latest Nielsen statistics reveal clearly that 2016 was another good year for retailer brands in Europe. This continues a long-term trend which shows that private label’s success isn’t tied to economic cycles but reflects the growing confidence shoppers have in retailer brands.” — Brian Sharoff, president, Private Label Manufacturers Association

n Market share in the United Kingdom stayed above 45 per cent. n In France, private label penetration remained over 30 per cent for the 13th consecutive year. n For the first time, private label penetration for all of the Scandinavian countries stands at 30 per cent or above. n Poland led private label growth in Central and Eastern European countries, climbing more than one point to cross over the 30 per cent market share mark. Hungary stayed steady at 34 per cent, while the Czech Republic and Slovakia remained over 30 per cent. n Among Mediterranean countries, market share in Italy climbed for the fifth consecutive year, posting its biggest increase since 2012. Greece and Turkey stayed above 20 per cent.

FALL 2017

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