Tissue products confirmed as kings of private labels

PLMA: the annual appointment with retailer brand products, held in Amsterdam on 28 and 29 May confirms the general growth trend of Private Labels on the European market. Tissue products soar above other goods categories an with an average European share of 45%, confirm themselves as the drawing force behind retailer brands.

Maura Leonardi

The consolidation that has been going on for a few years now in the European retailing scenario has determined a constant growth trend for retailer brand products. Globalization of the commercial distribution market took place during the three-year span from 1998-2001. And the arrival in Europe of the most important worldwide retail chain, the American Wal-Mart, by buying the German WertKauf, has determined a new distribution organization in Europe. The entrance of the American giant in a market up to now dominated by the Large French and German chains has created a new scenario for the structure of retailing in the Old Continent. The Americans plan to gain market shares through the purchase of prestigious chains: after the acquisition of the German WertKauf, the purchase of the English chains Asda and Agyl and the recent acquisition of the sales points opened in France by Mark's and Spencer, Wal-Mart's distribution has risen to 345 structures. Even Italy seems to be among the expansion aims of the American colossus: rumors exist of its interest in the Pam Group, retail chain strongly present in central Italy. This attack by the American retailer has determined not only a new competitive reorganization in a stabilized market, but also new strategies by retailers to gain greater customer loyalty.

The most important supermarkets, hypermarkets, drugstores and discount centers that offer consumers private label food and non-food products have conquered the loyalty of a growing number of consumers in all of Europe. For the consumer, the retailer brand represents the choice and the opportunity to habitually purchase quality products at a savings; for the retailer, it represents a further instrument for loyalty building. The desire to conquer a growing number of consumers and to gain their loyalty towards the retailer brand has induced the giants of retailing - Carrefour, ALdi, Edeka, Leclerc, Tesco, Auchan - to widen the range of products offered by improving the price/quality ratio. Not only, but many have also aimed their strategy towards market niches. On the shelves we find a growing number of biological products for foodstuffs, and ecological ones for the non-food categories.


The most important supermarkets, hypermarkets, drugstores and discounts have widened their product range by seeking those suppliers who are able to offer the best quality control and product development. Personalization, novelty and added value have become the key words for anyone desiring to work with large retailing.

The categories of the retailer brand products offered are in constant growth, as is shown by a recent survey carried out by AC Nielsen in the 7 main European countries: Germany, France, UK, Spain, Italy, Belgium and Netherlands. In 2001, 2174 goods categories were registered, against the 2081 of 2000, and the 1975 of 1999.

The strong concentration of private labels in the north European countries is demonstrated by the growth in sales registered in Germany, France and Belgium.

In Belgium the overall share in terms of volume for retailer brands is 34.7%, followed by Germany with 33.2%. For France the share is around 22.1%. Even the Mediterranean countries seem sensitive to the appeal of retailer brands: Spain and Italy are the two countries where retailing is rapidly expanding.

The trend towards modernization of the Spanish retail structure is demonstrated by the growth in retailer brands that has reached a volume figure of 20%. Today, in the Iberian peninsula, together with traditional sales points and small self-service stores we find hypermarkets and commercial centers.

Regarding Italy, a growth trend is registered and in 2001 the overall share of the PL goods categories in terms of volume exceeded 12%, even though the retailing system is still fragmented and regional.

Cristina Bernardini

If we extrapolate tissue paper goods from the ensemble of all the goods monitored, the PL share jumps forward. According to what was reported in the Annual Review presented by AC Nielsen in Amsterdam, in 2001 the average European share for retailer brand toilet tissue rolls exceeded 45%. At the top of the list is Germany where private labeled toilet rolls, in terms of sales volume, reached a quota of 60.8%, against the 58.4% of the previous year. The slow-down in the national economic growth rate has surely played in favor of private labels, which has supported the tendency of the German consumer to purchase his goods in hard discount chains, main vehicles of German PLs. And Aldi, uncontested leader in this distribution field, has witnessed an increase of over 20% in its market penetration rate.

After Germany comes Belgium, where in 2001 sales volumes of PL tissue rolls have attained an increase of 2.2%, stabilizing at a share of around 64.2%. France follows (52%) and, surprisingly, Spain, where private labels, with a market share of 48.7%, increased by over 6% between 2000 and 2001, following the progressive concentration of retailing in this country (see Table 3).

The other main Mediterranean market, Italy, has seen PL hygienic tissue rolls decrease their share by 4.5%, and today their share is of around 20%, less than half of the countries beyond the Alps. To be noted, however, that the peculiar configuration of Italian retailing, characterized by deep regional differences and by a net split between north and south, tends to lower the national average. But if we consider the PL quota on a regional basis, we find these shares close to other European countries.

Different are the considerations to be made for the UK and the Netherlands. In these countries, the slight arrest in the conquest for market share by the PLs (-1.0% in UK and - 0.5% in NL) is to be ascribed to a consolidation in the retail market that has here reached its maturity. The shares in terms of sales volume of toilet rolls remain nonetheless high, and, with 43.6% in the UK and 34.8% in the Netherlands, are at the top of the list of goods sold under the name of national super and hypermarkets.

THE EUROPEAN TISSUE MARKET REMAINS, THEREFORE, STRONGLY ANCHORED TO PRIVATE LABELS that are everywhere competing on an equal footing with branded products in terms of quality. Having moved away from the lower price category, retailer brand products cover the different quality segments - including the premium quality segment that up until just a few years ago was the exclusive domain of the main brands and specific niches such as ecological products. The trust that consumers are placing on products guaranteed by the store name are growing in every country even in the field of baby diapers and today, in Europe, private label diapers can boast of a share that exceeds 20%.

The contractual strength of European retailing dictates the rules of the tissue market. For producing companies, this translates into a constant development of new products and in a diversified geographical distribution of production. Italian companies offer a perfect example of this: all the main groups from Lucca have crossed national borders and installed new, highly technological foreign facilities in order to be able to supply supermarket chains in the respective foreign markets. The strategies of Italian producers have become a veritable model of development for companies that are involved with the big multinationals who are certainly not just standing by and watching. Among the big players, the first to openly reveal its strategy for attacking the private label market was the Swedish SCA who, certainly not by chance, is the only multinational completely under European control and it is well aware of how difficult it is to sustain growth in Europe by focussing only on brand strength.

Thanks to a chain of acquisitions, today SCA proposes European retailers a new production structure that goes from the Baltic Sea to the Mediterranean and declares an average share on the European private labels market that approaches 30% in terms of value. The same is true of Georgia-Pacific who, with the acquisition of the Fort James group, has entered into possession of a strong European division with a vast experience in this market. Today, one-half of the revenue coming from G-P Europe's consumer tissue segment is equally divided between branded products and private labels. Even Kimberly-Clark, owner of some of the most well-known brands in the field, has concentrated a portion of its production in store brands, proposing to them even TAD toilet rolls. And what about Procter & GambLe? The American giant is today the only one of tissue's "big four" that does not produce retailer brand rolls and, continuing its policy of 100% branded, in Spring launched Charmin brand TAD toilet rolls on the German market, backed by a strong advertising campaign.

And as usual, consumers will have the final word...

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