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I recently presented at the Liquor Path to Purchase Conference and caught the end of Gareth Pearson’s presentation where he stated that with the proliferation of private label, there’s probably a good chance that second and/or third ranked category brands will lose their listings. This was the second time in as many weeks that I was exposed to this thinking. As someone who built his FMCG career mainly servicing the second and third tier, it caused me great concern.
In their book, Store Wars: The Worldwide Battle for Mindspace and Shelfspace, Online and In-store, John Bradley & Greg Thain write “Second-tier brands are most threatened by the retailer’s appetite to create brands themselves, and traditional consumer marketing techniques offer little to hold back the tide”. The authors write that Tesco is now the UK’s biggest brand in part due to its private label portfolio straddling “generic (Tesco Value), copycat (Discount Brands at Tesco), premium (Tesco Standard), Super-premium (Tesco’s Finest) and Benefit based (Healthy Living, Light Choices, Organic Kids, Free from& Wholefoods).”
Research firm Planet Retail states that private label will generate 11% of SA food retail sales in 2012. Financial Mail quotes Michael van Wyk, Deloitte's Western Cape consumer business leader who says that consumers are looking for value and “there is mounting evidence which suggests national brands are losing their hold on the consumer”. I argue that value isn’t all about the price quality ratio and many national brands are losing traction because of relevance. What difference are they making to shopper’s lives? Where is the genuine shopper marketing?
If we look at South Africa’s Top Private Label offerings (click on each retailer for private label strategy highlights), I classify them as follows:
Research firm Planet Retail states that private label will generate 11% of SA food retail sales in 2012. Financial Mail quotes Michael van Wyk, Deloitte's Western Cape consumer business leader who says that consumers are looking for value and “there is mounting evidence which suggests national brands are losing their hold on the consumer”. I argue that value isn’t all about the price quality ratio and many national brands are losing traction because of relevance. What difference are they making to shopper’s lives? Where is the genuine shopper marketing?
If we look at South Africa’s Top Private Label offerings (click on each retailer for private label strategy highlights), I classify them as follows:
| Retailer | Generic | Copycat | Premium | Super Premium | Benefit Based |
|---|---|---|---|---|---|
| No-Name | PnP Choice | -- | Finest | Green,Organic | |
| Savemore | Spar-Branded | -- | -- | -- | |
| Shoprite Ritebrand | Checkers House Brand | -- | -- | -- |
Although we’re far behind the UK’s 41% private label share, local retailers are mirroring international best practices but I believe the outcome will be different:
- Emerging markets have higher brand affinity and loyalty
- Retailers are mainly focused on generic and copycat strategies with low margins and low marketing budgets to build their brand out-of-store
- Retailers have to take a generalist positioning appealing to a broad market so cant necessarily focus on specific segments Retailers are hamstrung by limited resources to manage their private label portfolios
- Muted private Label innovation and/or pervasive category strategy
Top tips for Category Lieutenants (2nd & 3rd Tier):
- Genuinely Innovate
- This doesn’t just have to be formulation development, as many will be restricted by R&D budgets. True innovation can come in many forms – new route-to-markets, differentiated format strategy for specific retailers, merchandising excellence, sub-category shopper insights etc.
- Agility
- Usually one will find that the Category Captain is focused on the top line across all channels and cant focus on everything, this leaves opportunistic gaps for the quick-thinking/quick-turnaround Category Lieutenants.
- Innovate quickly
- Shopper Insights
- Don’t ask the questions that the retailer already knows or the insights that Category Captain is already delivering. Complement with new information that can deliver that extra 5% - 10% growth which is sure to secure retailers share of mind
- Focus on execution
- A half-baked strategy with a 100% execution always trumps a sublime strategy with 50% execution. Focus on the 20% that’s going deliver 80% of the success. Tier your services focus (distribution, merchandising, new launches, in store investment etc.) per store accordingly.
- Forget about 100% national or regional compliance, Category Captains are paying for this already and are lucky if they’re hitting 60%.
Private Label is becoming Public Label and no brands are safe. Embrace the retailer’s strategy and continuously deliver incremental value. If you outsmart, outplay and out-service you won’t be out-of-shelf.
Keep Digging.
Jason Frichol ()
These views and opinions are my own and not those of my employer or customers.
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