PLMA 2005: value for money, value for brand!

PL, i.e. Private Label, i.e. increasing market shares registered in Europe for the food and non-food categories.

Maura Leonardi

This is what has emerged from PLMA, the annual appointment with “The World of Private Label” held in Amsterdam from 23 to 25 May of this year. The rising success of private label products initiated a few years ago seems to be inexorable, as stated in the recent research by AC Nielsen prepared for the event, from which emerges a drive in the sale of private label products in Europe. The product range offered has been extended and a 2% increase in terms of sales turnover has been registered in many European countries. Accomplice is a structural crisis in consumption in the present economic situation, in which convenience will continue to be a trend even in the near future.

THE CONSUMER HAS CHANGED, the purchasing and consumption habits have adapted to the changed economic conditions.

The post-modern consumer has become more eclectic, nomad, chameleon, searching for atmospheres and emotions; thus distribution and industry have to concentrate on these elements to define future innovation. The secret for survival in the jungle of the present economic situation lies in innovation.

THE EVOLUTION CAPACITY OF PRIVATE LABEL PRODUCTS registered in recent years has determined severe competition on the store shelves between private labels and branded products. Some retailers, as Tesco for example, have launched a private label product line able to marry in the best way possible quality and price, entering in competition with brand products and overlapping them.

DURING HIS SPEECH HELD DURING THE TRADITIONAL CONFERENCE CYCLE BEFORE THE SHOW, BERTRAND CHOVET, Managing Partner of Paris Venise Design, highlighted that retailing is developing its own identity through marketing and communication policies oriented towards revealing the “personality” of its products. According to Bertrand, packaging gives today an important support for the new positioning of private labels, constituting an essential element to distinguish the own-brand from the brand product during the buying process. This theory reveals that retailers have assumed strategies and concepts oriented towards obtaining consumers’ loyalty, giving identity to their own products.

Auchan, one of the major French retailers represented in many European countries, has increased its market share from 14% in 1998 to 23% in 2005, thanks to a re-styling process of its image based on a clear, simple and efficient communication campaign whose aim is to establish a trust relationship with consumers. An interesting result highlighting the growth of retailers in the last few years, leading to an interesting question which perhaps has not an easy answer: where has the brand gone?

What role does it have today?

LET’S TAKE FOR EXAMPLE TISSUE PRODUCTS. If paper products offered by retailers represented some years ago the “Cinderella” of disposable products, today this scenario has changed; we are assisting at a levelling between brand and private label, a strange phenomenon with repercussions on B2B. The gap between the two different categories has been considerably shortened. Makers of this new scenario are new marketing policies adopted by retailers, combined with the their strong negotiating power which has actually increased in the last few years. Two important phenomena, which brought to an overlap of brand products and private labels.

THE OWN-BRAND HAS CHANGED AND HAS ASSUMED A NEW IDENTITY: from simple and generic reference to product able to guarantee a capillary distribution, therefore a better offer and a better quality, establishing a different relationship with the consumer and inaugurating a new era for private label products. This muted panorama induces the converting industry, present on the market with its brands, to adopt strategies for maintaining and defending its resources and identity. The evolution and innovation of private labels have to be attributed principally to the know-how and research & development activities of the tissue companies, therefore their task is to re-design and strongly defend their leading-player position on the market.

IN RECENT YEARS, THE TISSUE PRODUCT CATEGORY HAS BEEN SUBJECTED TO THE PRICE FACTOR, discriminating quality, added value and innovation. A short sighted attitude degenerated into a run-up to a more convenient offer from retailers. If on the one hand the on-line auction sales simplify and accelerate the supply operations, on the other they determine a loss of value in terms of quality and technological innovation. It becomes the duty of large-size companies to defend the brand label value. Diversification and differentiation become two key words able to guarantee new developing margins for a market today pervaded with a general pessimism. Pessimism induced by motivations of an exogenous nature, tightly related to the general economic situation and to factors of endogenous type, resulting from problems of the sector (surplus in supply, consequent price and profit margin reduction). In this situation the small and medium-size companies succeed in reacting without much effort, whereas the large-size companies need to find the vitality and the dynamism through new ideas and new process reorganisations able to confer greater competitiveness to the market.

Indeed, companies today are squeezed on the one hand by the necessity to reduce costs in order to regain efficiency and profits, and on the other to generate value for the consumer. Therefore it becomes essential to activate business models able to favour innovations. Innovation guaranteed through technology, technology to re-design and improve production processes, profit and company performance. Marketing and communication, too, become two essential instruments for a new collocation of the brand within the supermarket. While private label products are champions of value-for-money, it is the industry’s task to reorganise the shelves giving more value to brand label products.•

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