Private Label Development Private Label Development and Current European Trends and Current European Trends

by

Jeff Freeman

Research Manager

Private Label Manufacturers Association

11 March 2004 Sinaia, Romania

What Is PLMA? What Is PLMA?

More than 3,200 members worldwide

Largest private label trade shows in the world- Chicago & Amsterdam

Services for retailers and manufacturers

www.plmainternational.com

A Definition Of Private LabelA Definition Of Private Label

Products which carry a retailer’s brand, such as:

name of the retailer (e.g.- Sainsbury, Casino)

or name of retailer’s brand (e.g. St. Michael’s- Marks & Spencer)

Why Do Retailers Develop Private Why Do Retailers Develop Private Label Programmes?Label Programmes?

Higher profitability and profit margins Better competitive position Increased visibility of store name Increased customer loyalty Lower sourcing costs Pricing free of manufacturer pressures

and of state price regulations Control within retail system: store

image, inventory control, range and quality

Retailer Brand Evolution In Retailer Brand Evolution In EuropeEurope

First were generics with low prices and high margins

Then came “Me-too” products

Third generation emphasizes quality and innovation

Many retailers use all three

BASIC MID-RANGE FINEST

Price Position Entry price level Brand -10% Brand +5%, unique

Margin Average

Volume

SOURCE: CHRISTINE CROSS

Example of Retailer Brand Example of Retailer Brand Positioning At TescoPositioning At Tesco

European Private LabelMarket Share -

Results from ACNielsen/PLMA

International Yearbook

Overall Private Label Market Share Overall Private Label Market Share (%) In 2002(%) In 2002

40.838.5

33.2

25.424.7

20.8 20.8

16.3

United Kingdom Germany France United States

Volume Value

Source: AC NIELSEN, PLMA

French Private Label Market French Private Label Market Share (%) in 2002Share (%) in 2002

22.5

30

41.7

Household Dry Grocery Frozen

Volume

Value

20.1

25

36.4

Source: AC NIELSEN, PLMA

German Private Label Market German Private Label Market Share (%) in 2002Share (%) in 2002

40

4549.8

Household Dry Grocery Frozen

Volume

Value

28.5

36.439.4

Source: AC NIELSEN, PLMA

British Private Label Market British Private Label Market Share (%) in 2002Share (%) in 2002

32.9

42.6

46.7

Household Dry Grocery Frozen

Volume

Value29.5

32.7

44.8

Source: AC NIELSEN, PLMA

Selected Category ConclusionsSelected Category Conclusions

One of every four products sold in Europe is private label

Overall private label market share is highly dependent upon local conditions

Conventional retailers are beginning to explore new areas for their brands, including non-food

Retailer Attitudes Towards Private Label -

Results from PLMA’s

Retailer Trends Survey 2002

Benefits Of Retailer Brand Benefits Of Retailer Brand Programme Programme (more than one answer possible)(more than one answer possible)

SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

Overall UK GermanyFranc

e CEE

Increase profit margins 75% 91% 72% 71% 71%

Good for retailer identity 64% 73% 72% 64% 29%

Build consumer trust 52% 73% 61% 42% 43%

Build consumer loyalty 64% 91% 72% 67% 43%

Compete with brands 54% 55% 39% 75% 43%

How Retailers Promote Their Own How Retailers Promote Their Own BrandBrand

(more than one answer possible)(more than one answer possible)

Overall UK

Germany France CEE

Local advertising 41% 27% 44% 29% 29%

National advertising 51% 55% 39% 58% 57%

In-store promotion 75% 82% 83% 67% 100%

Price-offs 39% 55% 11% 38% 57%

Coupons 19% 18% 6% 30% 14%

Sampling 26% 46% 33% 25% 14%

Comparisons tobrands 14% 9% 17% 25% 0%

SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

Main Competition To A Retailer’s Main Competition To A Retailer’s Private Label ProgrammePrivate Label Programme

Overall UK

Germany

France CEE

"A" brands 50% 73% 44% 67% 14%

Competitor'sprivate label 29% 18% 28% 21% 29%

Discounters 16% 9% 22% 4% 57%

National brands 3% 0% 6% 0% 0%

SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

Future Development of Private Future Development of Private Label By A Responding Retailer Label By A Responding Retailer (more than one answer possible)(more than one answer possible)

Overall UKGerman

y France CEE

More budget lines 24% 0% 17% 13% 43%

More value-added lines 76% 82% 72% 96% 86%

More bio lines 32% 9% 28% 33% 29%

More non-food 33% 36% 22% 38% 29%

More innovative

change 93% 82% 100% 87% 100%

SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

Summary Of Exclusive PLMA Summary Of Exclusive PLMA SurveySurvey

Nearly 90 % of retailers surveyed say that they will expand their private label programmes in the near future

Over half will look for new sources of retailer brand products from other parts of the world

More than half saw retailer brands as crucial to consumer trust of the retailer and for building consumer loyalty

Nearly 60% of Central and Eastern Europe respondents said that retailer brands help establish their identity in new markets

ConsumerAttitudes Towards

Private Label-Results from MORI/PLMA

Study

European Consumers Are European Consumers Are Increasingly Aware Of Private Increasingly Aware Of Private LabelLabel

0

10

20

30

40

50

60

Europe Netherlands Belgium France Germany UK

more aware

less aware

Source: MORI, PLMA

Surveyed European Consumers Surveyed European Consumers Responding That They Responding That They ‘Frequently’ Buy Private Label‘Frequently’ Buy Private Label

Europe- 32% Netherlands- 55% Great Britain- 52% Belgium- 38% France- 28% Germany- 26%

Source: MORI, PLMA

50%

16%

48%

25%

42%

23%

38%

16%

36%

28%

34%

17%

33%

23%

40%

20%

U.K. TheNetherlands

France Spain Belgium Germany Italy Europe

% agree % disagree

Consumers Want A Wider Consumers Want A Wider Variety of Private LabelVariety of Private Label

Source: MORI, PLMA

Consumer AdvantagesConsumer Advantages

Products as good or better or more innovative than “A” brands

Prices are 5-25% lower than “A” brands

Consumers trust the nearby store, which is important for fresh food and personal care items

Instead of looking for a new brand in each product area, there is a trusted name throughout the store

OPPORTUNITIES FOR OPPORTUNITIES FOR SUPPLIERSSUPPLIERS

A way to quick-start exports without high costs

Better margins than for branded production

An alternative to high cost of developing of manufacturer brand

Innovation safer and quicker due to consumer feedback from retailer

Private Label Outlook for Private Label Outlook for Central And Eastern EuropeCentral And Eastern Europe

Source: PriceWaterhouseCoopers, Incoma.CZ

Bulgaria- retailers emphasising own label to provide cost efficiency and consumer benefit, retail development is favouring local manufacturers

Czech Republic- large potential for private label, retailers are beginning to develop qualitatively and diversify their offer

Hungary- consumers attached to traditional brands, but own label introductions are increasing

Private Label Outlook for Private Label Outlook for Central And Eastern EuropeCentral And Eastern Europe

Source: PriceWaterhouseCoopers, Incoma.CZ

Poland- consumers are still developing attitudes on private label and brands, many retailers already have lines and expansion rates average 40% per year since 1998

Across the region, consumers are diversifying their shopping habits, using not only neighbourhood stores, but hypermarkets, supermarkets and discounters; ‘Eastern’ Consumers are becoming more ‘Western’ in their habits

Private LabelDevelopment and

Success

Eight Stage Process in SuccessfulEight Stage Process in SuccessfulPrivate Label DevelopmentPrivate Label Development

Formulate retailer brand strategy Identify products and opportunities Commercial requirements Supplier selection Consumer testing Design and packaging formulation Product launch Study impact and results

This is a team effort which involves manydepartments doing a specific task during theentire process.

SOURCE: CHRISTINE CROSS

Measuring Private Label Measuring Private Label SuccessSuccess

Number of new products launched

Improved customer perception of price & quality versus the competition

Improved margin mix over the product area

Volume increase over the product area

Increased sales and profit

The contribution of the product to the category

Better leverage over the brands

SOURCE: CHRISTINE CROSS

Examples of Successful Retailer

BrandStrategies

CASINO/ LEADER PRICECASINO/ LEADER PRICE

Casino is a large French retailer with a variety of formats in Europe, the Americas and Asia

Leader Price is Casino’s discount chain, started as a discount-level private label line in 1989, it later became a separate format

Leader Price products are carried across Casino’s formats and by retailers where Casino has no stores

Leader Price range has almost 3,000 items in grocery, perishables, frozen, drinks, dairy, gourmet and health and beauty

A number of sub-lines carry certifications as to origins, bio-friendliness, etc.

CARREFOURCARREFOUR

Carrefour is one of Europe’s largest retailers Recently launched the “No.1” private label line

are designed to compete with hard discounters, and be the least expensive in a category

“No.1” is in a variety of product areas, including fresh goods, cosmetics, health and beauty, dry grocery and elsewhere

The new brand was started almost simultaneously across Europe and in Taiwan in 2003

Packaging is very simple and clear Balanced in some countries by third-generation,

value-added private label, including ‘Reflets de France’

ALDIALDI

The largest discount retailer in Germany Notable for its use of many “in-store” brands,

none of which use the name of the retailer Developed reputation in Germany for excellent

prices and good quality Has gradually replaced brands over the years

with private label, now almost 100% retailer brand, including cigarettes and fresh meat

Has recently brought in scanning, electronic payment and fresh foods to better cater to consumer convenience and tastes

ALBERT HEIJNALBERT HEIJN

Largest retailer in The Netherlands Notable for its AH umbrella brand for most

categories, from fresh food to banking Specific lines, however, have different names

(Euroshopper, Perla Coffee) Products have clear positioning and message Albert Heijn is now experimenting beyond its

traditional format with Albert Heijn XL (large stores) and AH To Go (convenience stores)

Albert Heijn’s Central European supermarkets and hypermarkets use different branding, including the name Albert

COOP ITALIACOOP ITALIA

One of the largest Italian retailers Notable because the retailer recently

redesigned its own label lines New packaging involved work between

different departments of the retailer, design experts, suppliers and others

Redesign is meant to appeal to consumers, who want more information, quality and supply chain transparency, and to make the private label lines highly visible

Features of the new packaging include: more nutritional information than legally required, an information telephone number, serving and storage suggestions, quality certifications, etc.

SAINSBURY’SSAINSBURY’S

Sainsbury’s is one of the UK’s largest retailers. The Blue Parrott brand is notable because it

was specially developed to be good for children’s health, convenient, fun and to appeal to concerned parents.

Launched March 2001, over 150 products for children 5-11 years old.

Controlled levels of fat and salt, no carbonated drinks.

Designed to appeal to children’s tastes and to parents’ concerns.

Supported by celebrity endorsements and other marketing (special publications, ads).

GENERAL CONCLUSION: GENERAL CONCLUSION: SUCCESSFUL PRIVATE SUCCESSFUL PRIVATE LABEL ISLABEL IS Dynamic and innovative,

Highly dependent on the retailer and local consumer tastes and sensibilities, and

Responsive to concerns from the public about quality.

ASSOCIATION-AT-A-GLANCEASSOCIATION-AT-A-GLANCE

PLMA’s Head Office New York

PLMA International CouncilAmsterdam

Business Development Office Paris

PLMA International Council Hong Kongin Asia

PLMA Representative Offices ParisLondonBielefeldBarcelonaSydney

2 400

3 200

1980 254

1985 663

1990 1063

1995

2003

MEMBERSHIP GROWTHMEMBERSHIP GROWTH

Source: Jean-Pierre BONVALLET, PLMA

PLMA ACTIVITIESPLMA ACTIVITIES

Trade Shows :USA, Chicago- NovemberInternational Trade Show, Amsterdam- MayCountry shows- Britain, France, Asia

Studies, Conferences and Seminars Research and Publications Press and Public Relations PLMA Global: Online Trade Show Executive Education Programme (USA, The

Netherlands, France)

INTERNATIONAL SHOW PROFILE INTERNATIONAL SHOW PROFILE 20032003

- 2 500 exhibit stands- 1 300 companies, from 60 countries / v 35 in 1998

including 30 national and regional pavilions / v 13 in 1998

- Retail visitors in 2003:

Benelux (NL & B) 26% Germany 17% UK 11% Scandanavia 8% Italy 7% France 7% Spain

5% New EU Member 4% Other 15%

AMSTERDAM 2004 SHOW AMSTERDAM 2004 SHOW SCHEDULESCHEDULE

Monday 24 MayPre-Show Seminars 13.00-16.00 Preview for New Exhibitors 16.00-19.00

Tuesday 25 MayShow Floor Open 9.00-18.30

Wednesday 26 MayShow Floor Open 9.00-16.30

This year’s show will once again feature the New ProductExpo.

PLMA’s World of Private LabelTrade Show

25 - 26 May 2004

www.plmainternational.com