PJL-21

PLMA: a bright future for private labels

Private label products leap ahead in European consumption levels, becoming important competitors. This is what emerged from the annual appointment with the world of Private Labels, held from 26 to 28 May 2003 at the RAI Exhibition Center in Amsterdam. The Perini Journal interviewed the President o PLMA Brian Sharoff.

Maura Leonardi e Annalisa Pace


PERINI JOURNAL: IN THE PRIVATE LABEL SCENARIO, WHICH DO YOU THINK WILL BE THE FUTURE DEVELOPMENTS FOR THESE PRODUCTS, AND IN PARTICULAR FOR TISSUE PRODUCTS?

BRIAN SHAROFF: Tissue products for domestic use constitute a special segment in the realm of consumer products. It is a category where price still has a very strong influence. Today, the world market is very competitive and price is still the marketing factor more strongly considered. Consumers are aware of the importance of private label products, of the capability of retailers to offer low-cost products at an optimal quality on the average.

For this reason, when choosing paper products for domestic use, they prefer more economical products. This is a fact that explains the increasing market share that discounters and mass merchandisers have acquired in the course of the last few years in some countries. In the future, consumers will grow increasingly sensitive to economically advantageous products, and as much attention will be focused by large retailing towards supplying products at a competitive price. What I have discovered speaking with tissue producers is that price is a fundamental aspect that the consumer looks at when purchasing.


PJL: 2002 WAS CHARACTERIZED AS A YEAR OF CRISIS FOR THE ECONOMY, AND IN PARTICOLAR FOR RETAILING, WHERE IN SOME FIELDS CHANGES HAVE TAKEN PLACE. WHAT ARE THE EXPECTATIONS BY COMPANIES IN THIS FIELD?

BRIAN SHAROFF: The large retail chains will increase their market power in terms of contractual strength, also increasing the number of sales points. Despite the problems that some retailers have incurred in 2002 due to an economic crisis, this will not change the growth trend that retailing is experiencing. The world’s retail giants will continue along this trend. For example, Wal-Mart will consolidate its position in the worldwide retail scenario even further, with an increase in its contractual power and a greater penetration in European territory.

The French chain Carrefour and the German Metro have already acquired substantial contractual strength in Europe. Through the mergers and acquisitions that have taken place in the course of 2002, some retailers have gradually eroded market share, favouring consolidation of their chains in several European countries, thus guaranteeing for themselves a strong position through the creation of centralized platforms for the homogeneous control and management of the purchases of every individual sales point.


PJL: DO YOU FEEL THAT PRICE WILL REMAIN THE MAIN DISCRIMINATING FACTOR IN THE CHOICE OF A PRODUCT, OR WILL OTHER FACTORS COME INTO PLAY?

BRIAN SHAROFF: In general, I feel that the growth trend for PL products will be determined by the price and quality synergy. Even paper products for domestic use will be influenced by this policy: quality, added value and price will be the marketing instruments on which to focus.

In the future, retail chains will continue their growth, consolidating their brands through “brand policies”: high added-value products at economically advantageous prices will be the recipe for success and brand consolidation.

Quality, and not only price, will be the factor influencing the growth of PL products. In these last few years, the mission of the large retail chains has been guided by the will to consolidate their contractual power and their image.

Through consumer-aimed market policies, merchandising strategies and the use of advertising media (TV commercials, radio and magazine advertising, etc.), PLs have conquered an image that is very close to that of the brands.

Coop Italia represents an example of this market philosophy: a retailer who intends to label its products as “brands”, who has consolidated its image through constant innovation of its product portfolio.


PJL: IN THIS LAST YEAR, THE LARGEST INTERNATIONAL RETAILERS HAVE GROWN IN ITALY AND THE EURO HAS CELEBRATED ITS FIRST BIRTHDAY. WHAT BALANCE CAN THE PL FIELD DRAW FROM THESE LAST 12 MONTHS?

BRIAN SHAROFF: Italy, according also to what is mentioned in the AC Nielsen report, is a country that is slowly changing, where strong contrasts on a general level are registered.

There are areas that are growing quickly while others show hostility towards change. The reasons can be sought in cultural differences, in the different lifestyles present within the same country. Some areas of the “boot” are more sensitive to the penetration of PL products due to a greater and more modern penetration of the retail system itself. For example, northern and central Italy, where the main retail chains have grown and thrived, are more influenced by European trends.

Different is the situation for the southern region, where, due to different lifestyles and cultural habits, large retailers are having a tough time affirming themselves, while we find a strong presence of small, traditional retail shops. The introduction of the Euro and the consequent increase in prices that has taken place in this last year will lead to the research for the best sales conditions for consumer products and consequently also for those products typically known as “commodities”.

This slow penetration by large retailing in the Italian market must not be interpreted as a negative element for the growth and development of large retailing, but rather as an encouraging possibility of moderate growth able to guarantee optimum and constant development levels.


PJL: REGARDING PLS, HOW DO YOU SEE THE DEVELOPMENT OF THE PRODUCT LINES DEDICATED TO MARKET NICHES (ECOLABELS – ECOLOGICAL PRODUCTS) SPECIFICALLY FOR DOMESTIC PRODUCTS? WHAT WILL BE THE DEVELOPMENTS?

BRIAN SHAROFF: Tissue products as a category are very sensitive to the environmental issue – an issue which has been all but forgotten in these last 10-15 years, but which is today increasingly becoming a topic for discussion which involves also paper products. For this reason, in the future it will be necessary to create ecologically more friendly paper products. And retailers will be the pioneers in this case because they – rather than the big international brands – will be the ones to guide the market in this sense. In the past, the environmental problem was very highly considered.

So much so that recycled paper products were created. Today, the sensitivity towards the environmental issue has become extremely important once again, and numerous companies have created dedicated product lines: ecologically friendly toilet rolls and kitchen towels, table napkins and other products have adopted certification systems able to guarantee the ethics of the entire production chain. A good example of this are the Ecolabel products or the FSC1 certification.

The introduction on the market of ethically correct products that safeguard the environment and have high added value will become elements of brand recognition for retail chains.


PJL: HOW DO YOU SEE THE EUROPEAN AND AMERICAN RETAIL PANORAMA?

BRIAN SHAROFF: With respect to 10 years ago, the position of PL products is changing also in the US scenario. PL products have increased their market share also in the USA, reaching a 22% total – the same percentage registered in some European countries such as Holland or Spain. In the USA, the perception by consumers of PL products is approaching that of European consumers.

These changes also involve the negotiation methods: retailers have a greater contractual power due to a greater market penetration by European retailers. Dutch, Ahold, the Belgian Delays and Sainsbury – the largest chain in the Northeast – are the main European chains present in the US market. Aldi has attained a leadership position in the Midwest. In the future, I foresee a general trend that becomes more and more similar to that of Europe, with a consequent substantial growth of PL products.


PJL: WHAT IS THE SITUATION IN THE EASTERN EUROPEAN MARKET?

BRIAN SHAROFF: Europe is a very vast territory and for this reason, the AC NIELSEN report has chosen to cover only 7 countries in its Annual Report. These countries belong to Western Europe and are retained the most indicative. Within Europe, however, there are also other important markets for PL products.

An example is Scandinavia, where the retail scenario is changing and chains such as Ahold and Ikea are slowly turning small stores into shopping centers, thus determining changes in consumer habits. In Central Europe – the Czech Republic and Poland – all the main retailers such as Metro and Tesco, are present. Turkey is another country where Private Labels are growing at interesting speeds. Eastern Europe represents a very vast area that includes also Finland and Greece; a vast area where purchasing power and economic development prospects guarantee large growth opportunities for large retailing and consequently for private labels. •

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