The economic global crisis has been a catalyst for the development of retailers private label industry. But what will happen in the post-crisis era when the consumption will rebound on the majority of European markets? We tried to find the answer during our visit to the biggest trade show in Europe dedicated to private labels.

The increasing competition challenged retailers private label industy to go beyound the enty level price segment which had been its steak when entering the market, more than 30 years ago. The innovations presented at this year's edition of  PLMA's World of Private Label trade show in Amsterdam reconfirm this  trend, demonstrating that increasing quality and image of private labels is a priority for each major retail chain in Europe. They demonstrate, as well, that  big retailers already set up the private label strategy for the post-crisis era.

“While we might have believed that retailer brands were reaching their peak during the worst of the recession, it looks as though they are positioning themselves to succeed very well in an improving economy as well”, Gill Aitchison, President Ipsos Marketing at Global Shopper & Retail Research said. “Our data indicates that retailer brands still pose a formidable threat to national brands — perhaps now more than ever”, he added.

Nielsen research company, as well, noticed that, comparing global markets, there is a steady continuation of private label progress, which is actually the result of more retailers deploying private label products in a growing number of  categories.

Vegetarian and Bio setting the new trends

Vegetarian ready-meal and Bio food and cosmetics have been three of the biggest stars at PLMA trade show this year. Retails came up not only with impressive innovations in terms of products characteristics, but also with new packages. The "Idea Supermarket" section at PLMA exposed plenty of examples: intense green colored packages for SPAR vegetarian food range; natural design for Active Life products developed by Mercator; Waitrose private label ready-meals highlights the number of calories per portion on the upfront of the package with very large characters.

„New Product Expo” section of PLMA Amsterdam promoted a large number of products developed in order to meet the needs of consumers preoccupied for maintaining a healthy lifestyle, such as: fruit flavoured honey, frozen yogourt presented as a dessert, cereals with gren tea, Stevia sweetner, lactose-free chocolate, soya-chips for the oven, etc. But he biggest challenge for the producers is to have attractive prices for these products. For instance, Stevia is the newest innovation in natural sweetners in EU, but a chocolate with Stevia is, at present time, twice as expensive as a chocolate with sugar in retail, according to a Spanish manufacturer present at PLMA trade show.

Talking about substituts, many of the food products promoted at this year's edition of PLMA are substituts for the meat and for dairies. Dutch frozen food manufacturer Encko exposed at its stand the ready-meal “File Chicken Stile” which is actually made of soya, but with a strong chicken taste. The same company has in its porfolio some milk substituts : soya-drink with no sweetners, oat milk and rice milk.

At Fuchs stand at PLMA, one of the innovations exposed by the company was the "Clean Label" spices range, developed for the consumers who are paying attention to the raw materials supplying source.

The German confectionery manufacturer Lambertz exposed at PLMA some products from its Bio range recently launched on the market: Hafer Cookies and  some  de biscuits.

Bio trend is very visible as well in the cosmetics category, where private label migrates towards the premium segment.

Packaging innovations exposed at PLMA

The giant Tetra Pack was present at PLMA with a stand dedicated to the innovation Tetra Recart. Made of carton, this is a direct competitor for the can and it brings the new technology of sterilizing the food together with the package by boiling the two. It also has a very easy to use resealing system and allows the food to have a maximum 2 years validity period.

Tetra Recart is already available in 40 countries for more than 700 products such as stewed pineapple, vegetables, ready-meals or sauces.

In the frozen food category, the packaging innovations exposed at PLMA have the purpose to reduce the preparation time. For instance, Crop's manufacturer promoted the innovation "steam bag" available for different rice-vegetables mixes or just for the rice. The food inside the steam bag needs only 4 minutes in order to be ready to eat and it must be introduced in the microwaves in the bag, just as it was purchased in retail, because the innovative package can create steam out of ice at high temperature. Such products are produced by Crop's for Tesco retailer under private label. Another innovative package promoted at the company's stand allows the gratinage of vegetables in just 12 minutes in the microwaves.

Frozen food suppliers had not only a strong presence PLMA Amsterdam, but they also made themselves very attractive to the public due to the impressive number of new launched ready-meals, such as ethnic food - Italian pasta, chinese food, German hamburgers and sausages, etc.

Frozen Food is one of the categories with highest growth potential for private labels. Brian Sharoff, the PLMA president, explains why: “It’s all about the changing lifestyle we have witnessed over the last 10-15 years: with the increasing number of working women, there is a higher demand for fresh prepared meals and frozen food. As women have less time for cooking at home, they buy more frozen food which can be easely prepared in the microwave ovens. Furthermore, more and more people are cooking just for themselves, as the number of single person households increases. Retailers have responded to these trends by being very creative with food, including the innovations in ethnic food”.

In the non-food section of PLMA Amsterdam 2012, most of the novelties exposed brought more transparency to the package for body creams, soaps, shower gels. Many of the cosmetics private labels present in retail in Western European countries have a retro design in packages, which makes them more authentic.

Opportunities for the private label industry

PLMA pre-show seminars highlighted the private labels opportunities for the years ahead. Richard Wallace, Business Analyst at IGD, talked about the e-commerce and its incredible growth pace registered over the last years. Exploiting the infinite shelf in the online channel is, therefore, one of the biggest opportunities for the private label industry.

"Retailers must prepare for the connected shopper: a seamless multi-channel experience will be a must, not a nice to do", he said.

IGD representative also quoted the IGD ShopperVista survey from March 2012 which shows that recognising quality is a strong point of private labels on the market: 73% of European shoppers think that the quality of supermarket private label products has improved over the last couple of years.

The same IGD research shows that supermarket private label products tend to provide better value for money than the alternative brands – this is the perception of 69% of shoppers in Europe.

For retailers, private label is, as well, a strong lever to differentiate: 71% of shoppers in Europe think that some supermarkets have significantly better quality private label products than others (IGD ShopperVista survey, March 2012).

The same idea was highlighted by Brian Sharoff, PLMA President, in an interview with Progressive Magazine, in Amsterdam: "The problem with selling producers brands is that you can find them in any store and their price is constantly decreasing in this tough economic environment".

He made, as well, some predictions for the private label industry in Europe. "Private label products are successful on the market for over 30 years, they didn't develop due to the economic global crisis. But I think it is accurate to say that recession has been a catalyst for their development, putting a disadvantage on the producers' brands evolution. When the economy rebound after the crisis, private label will maintain the market share. It is a pattern we have witnessed in several countries which experienced the recession and the rebound over the last 35 years of existence of private label industry: the economic crisis is an impulse for private label development and then, in the recovery phase, it usually stays flat. In any case, it would not be realistic to claim that the present increasing trend of private label sales would stay forever".

At the opposite pole, the evolution pattern of A brands (producers brands) during crisis time and after shows a steep decline of sales in recession (partially due to intensifying promotional activity and discounts) followed by a significant increase in sales during the economic rebound. Still, we cannot talk about a real development in terms of volume, as price increase is usually a major contributor to the sales of producers brands rise after the crisis - according to Brian Sharoff.

About PLMA Amsterdam

PLMA's World of Private Label trade show has arrived at its 27th edition and it is organized by PLMA - Private Label Manufacturers Association.

The trade show attracts every year buyers from supermarkets, hypermarkets, discounters, department stores, drugstores, wholesalers, importers and exporters from over 100 countries. PLMA estimated a number of 8.000 visitors during the two days of the trade show (22-23 of May), on a total exhibition surface of approx. 34.000 sq.m.

This year’s event featured 2.100 exhibitors, including manufacturers and suppliers from 70 countries worldwide.

Founded in 1979, PLMA’s membership ranges from multinational corporations to small companies. With offices in Amsterdam and New York, PLMA represents more than 3,300 member companies from 70 countries. PLMA presented its first show in the United States in 1980, its first show in Europe in 1986 and its first show in Asia in 1994. Today, it provides services to member manufacturers in more than 70 countries.

Mihaela Popescu

Editor of Progressive Magazine Romania