PL Magazine April 2021

Private Label Magazine High value-added private labels driving innovation Conad, private label is the key Private label: the Italian journey, from avantgarde to vision in retail 2/2021

PLM - TABLE OF CONTENTS

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18

28

30

40

50

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Editorial Generation Z, the challenge of large-scale distribution

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IRI observatory

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Cover High value-added private labels driving innovation

18 On-the-field Experiences PL, high added value: the European Context

PLMagazine Monthly supplement of Distribuzione Moderna magazine, a media outlet registered with the Court of Milan Registration No. 52 of 30 January 2007 Editor-in-chief Armando Brescia Editorial director Maria Teresa Manuelli

24 Interview with distribution Conad, private label is the key

40 Interview with the company 2 thousands hectares of cultures for La Linea Verde

28 Packaging innovation Private label: the Italian journey, from avantgarde to vision in retail

44 PL scenario How UK uses Private Label for Innovation or as a Competition Tool

30 Markets Organic food ongoing growth in large-scale distribution

50 Markets Cosmetics and personal care in the times of the pandemic

Contributing Authors Gianluigi Andreoli, Stefano Ghetti, Fabio Massi, Paolo Palomba, Paul Stainton, Luca Salomone

Contact Phone 02/20480344 redazionedm@edizionidm.it

Creative Director Silvia Ballarin

Advertising Sales office: commerciale@edizionidm.it Phone: 02/20480344

Editor Edizioni DM Srl - Via A. Costa 2 20131 Milan VAT No. 08954140961

There is no guarantee that we will publish the original versions or any part of submissions (texts, articles, news, images, data, charts, research, etc.) sent by authors outside the Editorial Board. Submissions may, however, be published in a revised form for editorial reasons. It should also be noted that sending a submission constitutes an automatic authorisation by Edizioni DM Srl to publish it free of charge in all its publications.

EDITORIAL - PLM

Generation Z,

the challenge of large-scale distribution «Also during the pandemic, private labelled products have responded to consumers’ need for security and convenience, with savings of up to 100 euros per household, for a total of more than 2 billion», affirms Marco Pedroni, chairman of Adm Associazione Distribuzione Moderna at ‘From emergency to sustainable recovery: the contribution of Private Label’, a convention organized by Adm and BolognaFiere. In fact, considering the increasing uncertainties resulting from the pandemic, the 2020 statistics recently released by PLMA confirm consumers’ loyalty towards private labelled products. PL products’ market share in 2020 was indeed over 30% in 16 of the 18 European countries analyzed by Nielsen - a well known company founded in 1979 with the purpose of promoting private labels -, for the PLMA’s 2021 International Private Label Yearbook. Nearly half of the countries reached shares above 40%, whereas the majority of them recorded a positive trend in terms of market penetration. According to Richard Cope, Senior Trends Consultant at Minten, 2.6 billion consumers of Generation Z represent 40% of global buyers and a great opportunity for suppliers and producers of private labels. Convenience, health and sustainability are key values for these young people, who are more concerned with social responsibility, the health of the planet and their own wellbeing. Generation Z consumers expect retailers to promote a healthy lifestyle, but, at the same time, to pay special attention to the value for money. That same generation whose purchasing power is growing and that is increasingly turning to new purchasing channels. For example, eCommerce Food is among the most emerging areas of online shopping. The numbers are clear: in 2020 Food&Grocery online market equaled 2.7 billion euros, recording an upsurge of +70% compared to 2019. The growth, amounting to about €1 billion in absolute value, is the highest ever. This is an opportunity for retailers, but also a challenge of loyalty. Investing only in pricing can attract budget-conscious buyers, but it’s not enough to attract new and younger clients all the way into their stores. How will brands manage to stay relevant, bringing shoppers offline and into the aisles, while competing for brand loyalty?

Maria Teresa Manuelli Editorial director

PLM - IRI OBSERVATORY

Let’s take stock La MDD ha lavorato sulla segmentazione dell’offerta. L’incidenza delle linee alta In a maket significantly affected by pandemic, PL in 2020 reached gamma e specialistiche è aumentata di 4the punti vs 2016 (19,7% vs 15,7%)

a 20% market share

LCC – La segmentazione della MDD – % Incidenza – 2020 PL FMCG: turnover in milion € and % value share 25,4

23,9

23,1 11,1 9.992

9.689 18,2

18,3

2016

2017

Ortofrutta

0,3 January 20

1,6

0,5

Drogheria Alimentare

February 20

8,6 10.760

20,7

2,6 0,5

2019

April 20

7,3 9,7• Including Premium Discounters and Specialists 6,4 7,3 in Personal and Home Care, the share 2,0 was 26.9% with a €20,7 billion turnover.

Bio Eco 0,6 • Since 2016, PL has gained 1.8 percentage points with a + 21.8% sales increase Funzionale • During the lockdown, PL share >20 Kid 81,1 77,1

2020

19,9

Cura Casa

19,6

Cura Persona

0,8

0,2

Pasqua

March 20

15,7

Mainstream1

20,7

Bevande

19,7 +0,6% points

20,0

2,3 Freddo

• In 2020, turnover of €11.8 b.

1,2 11.798

19,5

2018

20,0 Fresco

8,6

18,9

21,4 19,8

10,0 10.271

2016

May 20

June 20

20,3

19,8

19,3

Primo Prezzo

2,8

Pet Care

20,2 2,6 18,8

LCC

LCC - 2016

0,2

-0,1

-0,1

-0,2

July 20

August 20

September 20

0,7

0,5

Natale -1,2

October 20

November 20

December 20

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. 2020: 52 settimane al 27 dicembre 2020. 1Insegna + Marchi DO + Altre Marche.

Source: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. Anni 2015 -2020. 2020: 52 settimane al 27 dicembre 2020.

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© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. © 2021 Information Resources Inc. (IRI). Confidential and Proprietary.

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La MDD ha lavorato sulla segmentazione dell’offerta. L’incidenza delle linee alta gamma e specialistiche è aumentata di 4 puntiThe vs 2016 (19,7% 15,7%) PL has been working on supply segmentation. incidence of vs high-end range and specialized lines by 4 points vs 2016 (19.7% vs 15.7%)2016 LCC – La segmentazione della MDDincreased – % Incidenza – 2020 FMCG-PL segmentation- % incidence- 2020 25,4

23,9

23,1

11,1

10,0

8,6

8,6

1,2

19,7

25,4

23,9

23,1

11,1

10,0

8,6

8,6

1,2

19,7 9,7 2,6 0,5 2,6 0,5

7,3 9,7 7,3

77,1 77,1

2,8 Ortofrutta

Fresco

Fruit and vegetables

Fresh produce

Drogheria Alimentare Grocery

Freddo

Bevande

Cura Casa

Cura Persona

Pet Care

Cold

Beverage

Home care

Personal care

Pet Care

2,8

LCC

2016

15,7

Premium

7,3 15,7

Organic Eco-friendly Funzionale

6,4 7,3 2,0 6,4 0,6 2,0 0,6

Functional Kid

81,1

Kid Mainstream1

81,1

Premium Bio Eco

Mainstream1 Primo Prezzo Lowest price

FMCG

2,6 LCC - 2016

2,6

FMCG - 2016

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. 2020: 52 settimane al 27 dicembre 2020. 1Insegna + Marchi DO + Altre Marche.

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo.

2020: 52Resources settimane Inc. al 27(IRI). dicembre 2020. 1and Insegna + Marchi DO + Altre Marche. © 2021 Information Confidential Proprietary.

3 © 2021 Information Resources Inc. (IRI). Confidential and Proprietary.

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IRI OBSERVATORY - PLM

La MDD ha lavorato sulla segmentazione dell’offerta. L’incidenza delle linee alta Innovation FMCG sales isèabout 5% each gamma einspecialistiche aumentata di 4year. puntiCovid-19 vs 2016 reduced (19,7% vs 15,7%) shelf innovation LCC – La segmentazione della MDD – % Incidenza – 2020 2016 FMCG - Share of new EAN1 value sales by %Number EAN launched per year – 2016-20202 year of launch 25,4 23,9 23,1 11,1 10,0 8,6 8,6 1,2 19,7 15,7 5,0%

5,3%

5,5%

5,1%

8,6%

8,8%

9,1%

8,1%

8,1%

4,6% 8,3%

34,5%

8,2% 7,0% 6,5%

7,4%

86,1%

Kid

70,3%

2016

Fresco

2017

Drogheria Alimentare

Mainstream1

BI; 83%

65,5%

2018

Freddo

Bevande

Cura Casa

Primo Prezzo

2,8

Cura Persona

Pet Care

2020

2,6

LCC

LCC - 2016

PL; 17%

Base

2019

81,1

77,1 % value EAN launched per year - 2016-202022

Launches 2017

77,5%

2,0 0,6

Bio Eco Funzionale PL; 12%

Launches 2016 Ortofrutta

7,3

Launches 2019

Launches2018

95,0%

2,6 0,5

Launches 2020

7,3 6,4

Premium

9,7

BI; 88%

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. 2020: 52 settimane al 27 dicembre 2020. 1Insegna + Marchi DO + Altre Marche.

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. Anni 2016 -2020. 2020: 52 settimane al 27 dicembre 2020. 1EAN con vendite >100€ nell’anno di lancio. 2Media anni 2016-2020.

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© 2021 Information Resources Inc. (IRI). Confidential and Proprietary.

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© 2021 Information Resources Inc. (IRI). Confidential and Proprietary.

La MDD ha lavorato sulla segmentazione dell’offerta. L’incidenza delle linee alta gamma e specialistiche è aumentata di 4on punti vs 2016 PL's innovation over the years has focused higher value(19,7% lines vs 15,7%) LCC – La segmentazione della MDD – % Incidenza – 2020 PL FMCG - Sales mil€, numerical new 25,4

23,9

23,1

Mio € / %

458

493

11,1

EAN1,

10,0

2016

codes, incidence by segmentation - Years of launch

8,6

8,6

1,2

19,7 9,7

559

489

465

22,6

24,9

29,6

7,3 2,6 0,5 23,2

15,7 7,3 6,4

Premium Bio Eco 25,8

2,0 0,6

Funzionale Launches PL Premium 4

77,1

75,6

72,8

61,6 68,9

6.767

7.458

Fresco

Drogheria Alimentare 7.959

Freddo

6.718

Bevande

5.244

Cura Casa

Cura Persona

1,8

2016

2017

2018

2019

2020

2016

Pet Care

81,1

Launches PL Mainstream 2

Mainstream1

69,0

Primo Prezzo

2,8 Ortofrutta

Kid

Launches PL Low price 3

LCC

2,6 LCC - 2016

15,1

2,3

1,6

2017

2018

5,2 2019

2020

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. 2020: 52 settimane al 27 dicembre 2020. 1Insegna + Marchi DO + Altre Marche.

Fonte: IRI Liquid Data®. Ipermercati + Supermercati + Libero Servizio Piccolo. Anni 2016 -2020. 2020: 52 settimane al 27 dicembre 2020. con vendite >100€ nell’anno di lancio. 2Insegna + Marchi DO + Kid + Funzionale + Altre Marche. 3Primo Prezzo. 4Premium + Bio / Eco. © 2021 Information Resources Inc. (IRI). Confidential and Proprietary.

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1EAN

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary.

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PLM - COVER STORY

High value-added

private labels driving innovation

How retail brands went from simple commodities to premium references, often anticipating trends. The effects on the industry.

In 2020, PL food product sales in Italy recorded a growth of +9.3%, thus reaching a 20% market share (+0.5% compared to the previous year) and a turnover of 11.8 billion euros (10.8 billion euros in 2019). According to Distribuzione Moderna, the supply chain of these products is a value generator, and a lever for the economic development and consequent revamp of the Country. «Distribuzione Moderna Alimentare - explained Marco Pedroni, President of ADM, Associazione Distribuzione Moderna - has an economic and social influence on the country. As a matter of fact, in 2020 it generated a turnover of 143 billion euros and it’s currently employing 425,000 people. It’s also Italian families’ number one channel for grocery shopping. Although difficult, 2020 represented a positive year for PL, as it grew by threefold compared to the products of the food industry.» Innovation, quality research, greater attention to Made in Italy and sustainability criteria is what characterizes the latest generation of PL products, which generate value for the whole industry. «PL has driven 78% of the national food industry growth in the last 17 years - adds Valerio De Molli, Managing Partner & CEO of The European House-Ambrosetti.- If they want to continue growing, innovation, research and engagement should therefore be PL brands’ watchwords.»

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COVER STORY - PLM

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PLM - COVER STORY

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2018 - Research report - IPLC

COVER STORY - PLM

THE VALUE IN BRAND LABELING In particular, value-added private labels have become ever more important for PLs across Europe. Besides ensuring higher revenues, they are vital to differentiate their products from competitors’. They allow retailers to launch unique initiatives to meet specific needs of consumers, thus fostering customer loyalty. According to a research study carried out

by Mintel, a market intelligence agency, new opportunities for PLs are no longer to be found in commodities but in sophisticated and high-end products. Over the years, retail brands have moved beyond the simple low-price positioning and, today, consumers tend to consider the brand value proposition as a whole. This means that quality and origin of raw materials, environmental enhancement and protection, a balanced diet and healthy lifestyle are key values for PL consumers. Furthermore, premium tiers further help companies meet their customers’ needs. Premium products allow retailers to introduce high-quality anchoring to their product mix. While these products are unlikely to be the main choice in every line for the average consumer, they are still premium offers for special occasions and, more often, for those categories that are of particular importance to them. Premium brands also reduce the possibility for higher quality products under national brands to be chosen over their products by consumers.

PREMIUM PLs WORTH IN ITALY Based on the IPLC research study ‘Opportunities in the value added Private Label Market’ (2019), the first Vapl brands appeared on the Italian market in the early 2000s, mainly as 9

COVER STORY - PLM

Etruria Retail and Crai, between regionality and pleasure u In Italy, regionality and supply chain are the real

added value of Sapori & Valori, Etruria Retail brand that includes the excellencies of the territory and aims to strengthen its relationships with producers.

«Etruria - affirms Maurizio Nicolello, Sales General Manager of Etruria Retail - generates over 20% of its turnover with local suppliers. Among these, 200 are under the Sapori & Valori brand, with more than 2 thousand fresh products.» Crai Group has recently revamped its premium segment with private labeled products launching Piaceri range of products, a journey through good food. Premium tier is composed of two lines: Piaceri Italiani and Piaceri dal Mondo (that is to say, Italian Pleasure and World pleasure). The first proposal is a journey where flavors meet regions, territories, microclimates and the different traditions that over the centuries have made the Italian food heritage unique all over the world. All this in a line of references enhanced by trademarks. On the other hand, Piaceri dal Mondo encompasses the excellence beyond our borders. A range that gathers the best the world has to offer, which selects products in geographical areas where they are authentic specialties. «It’s not only a simple graphic restyling of our traditional Piaceri Italiani brand- says Mario La Viola, Marketing, Format, Network and Development Manager at Crai-, but it is a project to strengthen our premium range through a proper real brand strategy developed on naming, creativity, selection, content and support communication. In conclusion, I’d like to say that we are very happy with the pay-off that we have identified - because it’s true, perfectly credible, unique, and meaningful that ‘Tradition is always right’.» The new Piaceri line comprises more than 280 products and oversees the most important goods categories, such as food, fresh and extremely fresh, service counter, drinks and frozen products.

premium regional private brands, such as Conad’s Sapori & Dintorni, Unes’ Il Viaggiator Goloso and Carrefour ’s Terre d’Italia. Such initiatives were soon followed by Coop Italia’s Fior Fiore line and Top by Esselunga. These brands are still major distributor brands in the market premium tier. «Over the years, PL has largely focused on product segmentation - explains Gianluigi Andreoli, Iri Italia Account Director - particularly on high-end and specialized lines.

In 2020, premium private label revenues accounted for 9.7% of the total PL turnover, while the percentage recorded for the organic ones was equal to 7.3%. Innovation accounts for approximately 5% of FMCG sales (total brand-name industry + PL) each year.

In 2020, it was slightly lower due to the pandemic. However, if we look at the number of new EANs launched on the market every year (total LCC), on average 88% of the new products are launched by the brand-name industry, while only 12% by PL. In terms of value,

11

PLM - COVER STORY

instead, the new PL products are 5 points higher, which corrisponds to 17%.»

Speaking of innovation, instead, according to the data provided by Iri, the organic industry is one of the markets where the PL has been performing better.

In fact, 22% of new organic products launched are private labels, which, in terms of value, corresponds to 43% of revenues generated by new products.

THE CHOICES OF SELE X AND CONAD In 2020, the specialized lines of Selex Group generated over 220 million euros in revenue, accounting for about 25% of the turnover. «We’re mainly focusing on the development of our high-end and organic/supply chain line - comments Luca Vaccaro, Head of Commercial Brands of Selex Gruppo Commerciale.- As for our high-end line, our aim is to expand our fruit and vegetable product range and promote Italian specialties. As to our supply chain line, we’ll include a range of antibiotic-free products to our meat line.»

According to IPLC, regional and premium PLs in Italy often partially overlap, as regional origin is considered a product added value. For example, as we read in the research study «Conad’s regional PLs perfectly match the cooperative structure of the company. Indeed, it has stores all over Italy, and regional store owners are well connected with local suppliers.» And precisely this year, Conad was awarded at the prestigious European Private Label Awards 2021 for two products of their premium ‘Sapori&dintorni’ and ‘Sapori&idee’ private labels.

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COVER STORY - PLM

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COVER STORY - PLM

Over the years, Conad has developed a large project involving their private labeled products, with over 10.6 million families choosing them. Today, it accounts for about 30% of total private labels in Italian large-scale distribution. These lines are part of the premium range of the brand. The first includes a wide selection of products made from local raw materials, and traditional processing and preparation methods. Such products are carefully selected for their quality and link with tradition.

The second, recently launched, expresses a new idea of experimental taste, with gourmet raw materials alongside innovative proposals and unusual combinations. «The launch of Conad’s new Sapori&Idee line - says Francesco Avanzini, Conad General Manager - is in line with the principles of our work: the search for quality and long-lasting collaborations with our suppliers, with whom we share our same values. We’ll keep on working by seizing new challenges to provide customers with affordable innovation and high quality and the entire supply chain in which we operate with support and collaboration.»

TIER

TIERS BASED ON PRICES (good, better, best)

TYPE OF PL

Lowest Price

CUSTOMER CONVENIENCE PROPOSAL (ADVANTAGES FOR THE CUSTOMER)

STRATEGIC GOAL (ADVANTAGE FOR THE RETAILER)

Quality suitable for the price

Reist discounters and killer category

Hill Country Fare (HEB); Farm brands (Tesco, fresh categories); Frescampo (Exito); Despar Budget

Quality equal to or higher than the leading brand but at lower prices

Create a critical mass to reinforce the brand message

Great Value (Walmart);Up & Up (Target); Quality GPA, Exito)

Best possible product with no savings

Elevate brand image, increase profits

Tesco Finest; Boots No. 7; 7-11 Premium; Coop Fior Fiore; Esselunga Top

Meets specific needs in wide category range

Build customer loyalty and meet growing customers’ needs

Simple Truth (Kroger); 365 Organic (Whole Foods); Tesco Free from, Taeq (Exito, GPA); Änglamark (Coop Noeway, Denmark, Sweden); Conad Alimentum or those who have specific dietary needs

Unique products at competitive prices

Credibility in competitive categories, differentiated products in specialized markets

Aldi; Lidl; Chockablock, Parioli (Tesco); Lidl’s Cien for personal hygiene

Cheap Mainstream Generic Premium Special

Customer-First Brand Lifestyle Brand

Fantasy brand Category brands, membership brands, special brands Source: dunnhumby Shopper Thoughts, 2020 may

MAIN EXAMPLES

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PLM - COVER STORY

Private Label according to Bennet u High added value Bennet lines -Selezione Gourmet Bennet,

Bennet Bio, Bennet Eco, ViviSì- are at the core of important numerical development supported by suitable promotional plans.

«Among our premium lines, the most performing one is ‘Selezione Gourmet’- they claim.- In 2020 it achieved 20 million euros, a remarkable, compared to last year, which 15% of our private label share». Also, the Bennet product range, sustainable-certified, is increasingly growing (+9%), responding to the needs of those who are more and more concerned with planet health.

«The company strategy is moving towards increasing its sustainable product range, including those with FCS, UTZ and Bio brands. Similarly, the company places great value on product origin, favoring those coming from the area where hypermarkets are located. From this, in 2020, the project Filiera Valore Bennet was born, with the aim of tracking the product journey from farm to table». At present, the Italian large-scale distribution chain is focusing on the meat and fish category and it will extend the project to other sectors.

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COVER STORY - PLM

CARREFOUR STRIVING FOR ITALIAN SPIRIT IPLS’s research study showed that in some cases Regional and Premium products are combined under the same brand, such as Coop’s Fior Fiore, Sigma’s Scelto and Esselunga’s Top. For over 20 years, Carrefour Italia’s Terre d’Italia line has aimed at enhancing Italian regional excellence, while promoting a wide range of traditional products with the collaboration of small and medium producers. From 2019, some references of the line are FDAI - Firmato Dagli Agricoltori Italiani - certified thanks to a partnership agreement signed by the company with Coldiretti and Filiera Agricola Italiana. The collaboration is aimed at tracking food products throughout the supply chain, supporting its local identity, biodiversity development, as well as, safeguarding consumers’ rights. This collaboration also allows Italian producers to have real opportunities of internationalization. In 2020 alone, the company exported 175 private labeled products to France, Belgium, Poland, Romania, Dubai, China, Taiwan, among which 88 of Terre d’Italia line, for a value of 1,540,000 euros. «Projects convey Carrefour ’s actual commitment toward promoting more sustainable and responsible food systems that can generate value for local communities. This is the philosophy behind our ‘Act for Food’ strategy, which aims at ensuring Food Transition for everyone through concrete steps,» explains Gilles Ballot , Carrefour Italia Merchandise, Marketing and E-commerce Director. Together with Terre d’Italia, Carrefour also features Filiera Qualità, their basic meat, fish, fruit and vegetables line of products, which encompasses over 8,000 among small and medium agricultural enterprises and cattle farms all over Italy. Through their Carrefour Bio line, instead, the retailer developed 389 references with the aim of making their organic products even more affordable.

Maria Teresa Manuelli

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PLM - ON-THE-FIELD EXPERIENCES

PL, high added value:

The European

Context Similar to branded products in quality, PL has always competed, at a price around 20% lower, with the leading brand in terms of volume. However, in recent years, PL has also become a benchmark for measuring retailer competitiveness against discounters, and, to do so, it sacrifices part of its marginality.

T

he research, Opportunities in the Value-Added Private Label Market (IPLC 2018), carried out in 9 European countries among 25 retailers assessed how vast and well-structured PL architecture is, in order to meet buyers’ expectations when it comes to points of sale. The largest European retailers have, on average, around 3,000 SKUs of Mainstream PL (table 1).

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ON-THE-FIELD EXPERIENCES

- PLM

Tab. 1 Distribution and coverage of PL positioning in major European retailers

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PLM - ON-THE-FIELD EXPERIENCES

In recent years, the mainstream supply has been enriched with an ever-increasing number of Premium PL SKUs (tab. 2) to help retailers make their supply even more distinctive and, at the same time, seek greater customer loyalty and better margins.

Tab. 2 - Nr. Sku’s MDD Mainstream

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Tab 3 - Nr. Sku’s MDD Premium

ON-THE-FIELD EXPERIENCES

- PLM

Tab. 4 - Nr. Sku’s MDD Bio

Tab. 5 - Nr. Sku’s MDD Free From The number of products in the Organic PL (Table 4) and Free-From PL (Table 5) ranges has also increased exponentially, both to ensure an ever wider selection, and to recover part of the margins lost by mainstream PL lines.

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PLM - ON-THE-FIELD EXPERIENCES

T

he development of PL architectures and, above all, of Value-Added PL product lines have led to double-figure positioning with respect to those of Standard Private Labels (Table 6).

Tab. 6 - Average prices of European Value-Added PL compared to mainstream PL

In particular, the PL lines with the highest value encompass products: • Free-From, still more competitive than branded products and/or products marketed in other and different distribution channels.

• Regional, a PL positioning difficult to compare with branded products.

• Organic, in many countries PL is the market share leader, both in quantity and value.

• Premium, products with specific claims and positioning in terms of quality and/or origin.

• Eco-Friendly, products that nevertheless allow for greater comparison with branded products It is also worth comparing the different values of Value-Added PLs in the various European countries (table 7): • In the Netherlands, UK , Belgium, Portugal, France it is Free-From products that ranks first.

• In Germany, as in many Northern countries, Eco-Friendly products boast the highest value recognition.

• In Spain and Italy, raking first in terms of value are the Regional products, not present in the gastronomic culture and, therefore, in the selection of Northern European PLs, excluding Germany.

• In Ireland, Organic products are on the podium in terms of value, and these products are also positioned higher than the Premium PL in the Netherlands, Portugal and Italy.

Tab. 7 22

ON-THE-FIELD EXPERIENCES

- PLM

Retailers, faced with limited shelf space, focus on optimizing category performance of the point of sale.

With a better understanding of buyers’ preferences, managing Added-Value PL across different levels of architecture is therefore instrumental in increasing sales and, more importantly, profits. Finally, the retailer in most cases uses the store image to support the private label range in terms of quality and positioning.

Therefore, in addition to helping the buyer in the decision-making process during his/her shopping experience, Value-Added private labels will increase PL awareness for customer loyalty to the brand. l

Tab. 8 Price premium for food brands, Journal of Product & Brand Management, 2014

Stefano Ghetti Partner IPLC Italy

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PLM - FROM THE DISTRIBUTION’S POINT OF VIEW

FRANCESCO AVANZINI, CONAD MANAGING DIRECTOR, TAKES STOCK OF THE CURRENT SITUATION WITH PL MAGAZINE

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FROM THE DISTRIBUTION’S POINT OF VIEW

- PLM

Conad,

private label is the key PRIVATE LABELED PRODUCTS HAVE A SHARE OF OVER 10 POINTS ABOVE THE NATIONAL AVERAGE. MORE THAN 5,000 REFERENCES DIVIDED INTO 13 LINES. The incidence is really high. What ’s the trend?

Conad brand products, in addition to having a share of over 10 points above the national average, continue to grow. However, the growth of private labels, and, in particular, that of Conad during the Covid year, is not only due to greater convenience. In fact, quality control and the link with the territory have also played an essential role.

What are, in your opinion, the most strategic sectors for private labels?

Rather than identifying single good categories, I prefer to underline how it’s important to adopt a renewed strategy of product positioning, together with a segmentation of the portfolio category and an architecture of well-structured and an ever-evolving label, based on the analysis of consumers’ needs and their further segmentation by age, residence, education and household. Anyway, let me say that Conad Private Label is among the first most sold labels in 76% of categories. In fact, in cold cuts and grana cheese, it accounts for 70% and in many other baskets it exceeds 50%, speaking of fruit nectars, fruits and dry legumes, eggs, butter, vegetables, and frozen food, for example.

Leading the Italian largescale distribution, Conad is also a market leader in private labels, whose s har e mar k et is e qual t o 30. 9% on pack age d large -s cale s ales , w it h a s ele c t ion of about 5,000 references divided int o 13 lines . Franc esco Avanzini, Managing Director, goes into details with PL Magazine.

Which categories are you thinking of for future development?

We’ve noticed a great increase in green private label products, with a 12% growth. This sector has interesting potential, with new proposals, suitable to meet the need of customers, who are increasingly conscious of this issue. And this is through the innovation of both the product, with more quality and selection of raw materials, and new packaging, using increasingly sustainable and high-performance materials.

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PLM - FROM THE DISTRIBUTION’S POINT OF VIEW

INCIDENCE OF THE LINES ON SALES OF THE CATEGORY:

LABEL REFERENCE NUMBER:

30.9 %

~5,000

IN THE FAST-MOVING CONSUMER GOODS

LINE NUMBER: 13 lines – Conad Logo Rosso, Conad Essentiae, Conad Baby, NaturaLine, Conad Piacersi, Conad Alimentum, Verso Natura Conad, Sapori&Dintorni Conad, Sapori&Idee Conad, Conad Petfriends, Parafarmacia Conad, 11 Paralleli, Creazioni d’Italia (for foreign markets)

26

FROM THE DISTRIBUTION’S POINT OF VIEW

- PLM

‘ Sapori&Dintorni’ is your crown jewel. Let ’s talk about it . . .

With a 17% growth in 2020, the trend of Sapori&Dintorni label is extremely positive and encouraging. This is a clear sign of consumers increasing interest towards private labeled products of premium quality. So, at the end of last year, we also launched the new Sapori&Idee Conad line, which offers a more contemporary product range, for those who love innovation and new proposals.

What can you tell us about suppliers?

Suppliers are always carefully selected, but in particular, I’d like to underline that, when it comes to Conad products, we have always paid attention to the enhancement of local specialities, cooperating on a long-term basis with thousands of small and medium Italian enterprises. At the end of 2020 we recorded about 7,000 local suppliers, whose turnover is equal to 2.6 billion euros.

Why are Conad private labels also sustainable?

From the environmental point of view, thanks also to the development of new technologies for designing compostable packaging, now we are able to maximize the usage of recyclable or recycled packaging in our Conad products. Furthermore, we also adopt product certifications that certify our respect for the environment and ecosystem.

But sustainability, for us, has also an important social and economic value, which is reflected, in particular, in the support of SMEs in the food supply chain, as well as, in the enhancement of typical local productions.

Bassi&Fissi, Private Label and many other initiatives on the side of convenience. What ’s the savings for the consumer?

Savings is substantial for Italians, but we’d like to specify that our products in the “Bassi & Fissi” basket are definitely goods at a competitive price, and of unequaled quality for their price, which are able to compete, on a level playing field, with the leading brands of the same category. With 700 products in more than 100 good types, we estimate savings of up to 1,500 euro a year per household.l

Luca Salomone, professional journalist specialising in consumer goods, distribution, shopping centres and finance.

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PLM - PACKAGING INNOVATION IN PL

PACKAGING INNOVATION PRIVATE LABEL:

the Italian journey, from avantgarde to vision in retail

The avantgarde and innovative role of private label in Italy continues to respond today, as 20 years ago, to competitive technological and social challenges, renewed and accelerated also by the effects of the pandemic in an increasingly saturated market.

P

rivate labels in the FMCG sector have, in recent years, assumed the role of reference point for the brand supply and product categories, evolving the traditional positioning of the Private Label (PL) of “products similar in quality to brand X, at a lower price”.

The advantage of quality, at all levels, expressed by accessibility (distribution, variety of range, pricing, local products, premium, etc.) represents the real “ vocation” of the PL that has been developed as Label of retailers in Europe, as observed by the IPLC research: “Opportunities in the value added Private Label Market”. In Italy this journey started almost 20 years ago, when the first PLs emerged with specific positioning, i.e. organic, origins, specificity and territory, gourmet products, but it was the launch of one specific PL that drove the process. Back then, while French chain store brands were growing in Italy, the chain store model seemed more trust-

28

PACKAGING INNOVATION IN PL - PLM

worthy than the cooperative and associative retail model between retailers and entrepreneurs. But the latter became more conscious of the distinctive value of the economic and social identity represented by local communities and territories, also made up of traders and SMEs, to the point that they turned it into something original: the distinctive uniqueness of the brand value proposition to be narrated.

But, the question was not simply “What is the next branded product?”

But ... “What are our original business distinctives? How can we embody them in a product, in a supermarket, in a tour guide, in an ice cream shop, in an experience?” But above all: “How can we direct them to a rapid and general improvement of the brand quality and value, in terms of supply, service, people and, in short, of the identity of the points of sale, members-entrepreneurs, and, therefore of the entire group?” As part of a new “store and category management” strategy, the answer to these questions was Sapori & Dintorni Conad, which - launched after Conad Bio and Percorso Qualità Conad, and almost at the same time as Esselunga Bio, Terre d’Italia and Filiera Qualità Carrefour, I Sapori delle Regioni Auchan, Il Viaggiator Goloso Unes, Fior Fiore Coop, Scelto Sigma, to name but a few - gave impetus to the development of Private Labels as Brands.

The other source of innovation was the passionate commitment of people, entrepreneurs and managers, supported by a managerial development plan, marketing skills and communication investments from the very beginning, in Points of Sale, mass media (Television, Radio) and new media (dedicated website). Today, Sapori & Dintorni Conad is alongside Sapori & Idee, an appetizing promise of innovation, experimentation and exploration that result from the answers to questions that are not so different from those of 20 years ago, and which now have to face new “fundamentals”: sustainability, healthiness, technology, omnichannel, simplicity, as well as accessibility. The recent European award, assigned to products with these two brands, is an acknowledgement that renews the responsibilities and expectations of avantgarde practices and innovation of Private Label in Italy, especially by the Italian leaders of large-scale distribution, giving them a more prominent role in Europe as well, a market that is now “domestic” if not yet for our points of sale, certainly for our products.l

Paolo Palomba, Managing Partner IPLC Expertise on Field 29

PLM - MARKETS

Organic food growth in large-scale distribution

Large-scale distribution supermarkets are now leaders in organic food sales. Last year, their market share reached 47%, compared to 27% in 2010.

T

he world of organic food proved to be a relevant industry in large-scale distribution also in the past year, despite the Covid-19 pandemic having deeply changed consumers’ purchasing habits. Based on Bio Bank data, in 2020 the total of organic food sales in large-scale distribution was over 2 billion euros, with a +5% increase compared to the previous year. Such a trend, however, has been slower in the last two-year period. The number of private label organic products continue to grow, reaching 4,700 in 2019 (+8% over the previous twelve months). Large-scale distribution supermarkets have become leaders in organic food sales to the point that last year their market share reached 47%, compared to 27% in 2010. A rise boosted by the work of retailers who have focused on the organic product range of their private label, making it increasingly broader and more in line with consumer needs.

30

n n n n

MARKETS

- PLM

+0.5%

u Average share of organic products in Carrefour Italia points of sale (higher than in the large-scale distribution market, with Carrefour Bio brand having recorded a double-digit growth).

+7%

u Gruppo Tuo organic food sales growth (2020)

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MARKETS MERCATI

An organic line that meet every need Tuo Group organic food supply includes a complete range of products that embraces all segments: from pasta to oil, yogurts, eggs, crackers, jams and cookies. «We like to define Biodì as a line of products for feeling good and respecting nature. - explains Mr. Versaci - The references of this range, in fact, originate from organic farming and precise rules, established by Regulation EC 834/2007, which prohibits the use of antiparasitics and chemically-synthesized fertilizers. For this reason, only organic fertilizers are used for the soil.

Our main goal is to meet the needs of the market and, as a consequence, those of our consumers.

That’s why we always try to expand our offer with new products.»

- PLM

2 0 2 0, A YE AR AT DI FFERENT R ATES Initially, organic food sales in Italy saw a significant rise during the lockdown period, however, they later declined in the second half of 2020. At the end of the year, such sales volume recorded a +4.5% growth in large-scale distribution compared to 2019. In terms of formats, hypermarkets decreased by 0.5%, while supermarkets and mini-marts saw a +6.5% and 3.1% growth respectively (Nielsen data). «Fortunately - affirms Massimo Silvestrini, Carrefour Italia Head of organic products development and local products, the work done by our Group in the organic food sector allowed us to record a much higher sales delta value compared to such figures. Furthermore, the average percentage of organic products sold in our supermarkets is 0.5 percentage points higher than in the largescale distribution market. Our express channel saw a far more positive trend, as the percentage is about three points higher than the average format. In addition to this positive trend, our Carrefour Bio private label experienced a double-digit growth.»

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MARKETS

- PLM

Sales channels: ups and downs

-0.5% hypermarkets +6.5% supermarkets +3.1% mini-marts Source: PLM analysis based on Nielsen data

WI DER R ANGE OF I N-STORE PRODUCT S AND MORE VI SI BI LI T Y Organic products are key in the food transition strategy of Carrefour Group. «We’re expanding our organic food supply to provide our customers a wider and more affordable range of products. - adds Mr. Silvestrini - We’re adding some new organic products, especially fresh food and canned goods to our Carrefour Bio brand. Our aim is to enhance organic products in our supermarkets by creating dedicated areas (‘Organic Shops-in-Shops’) and make them stand out from the conventional ones in our aisles.»

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PLM - MARKETS

over 100

Crai Bio line references

THE BEST-PERFORMING AGRICULTURAL REFERENCES In the last months, there have been positive trends for different types of organic food in large-scale distribution. «Organic food category - claims Gianfranco Versaci, Gruppo Tuo Purchasing Manager - is growing strongly in Fresco Market, Tuodì and InGrande physical stores, as well as in e-commerce/online. There has been a growth of +7%, which is in line with the market. Organic food sales increased even during the lockdown period, mainly due to the consumption of large amounts of flour and eggs used for baking at home. Also organic fruit and vegetables are significantly increasing, as consumers are paying more attention to both their health and the environment. And then comes our Biodì private label line, for which we’ve recorded a constant growth in both traditional and online stores.»

CO MP ARI N G P RI V AT E L AB ELS

+ 36

MARKETS

- PLM

ADDRES SI NG NE W CONSUMER TRENDS As stated by Pietro Poltronieri, Crai Secom Product Manager, despite not having played a leading role in the last months, the organic food segment of private labels is growing and represents a thriving and interesting opportunity for the development of the whole industry. «We’re really involved in the process, and one of Crai’s assets is the fact of having addressed these new trends through private labels. A concrete example is the range of organic products in our stores.

With our Crai Bio line we’re currently offering a wide range of products that meet most of our customers’ daily shopping needs. Our private label organic food line includes over 100 products and we expect to add so many others (to the list) in the future.»

2

billion euros

+5%

Organic food sales in large-scale distribution stores in 2020

47%

Large-scale distribution share of organic food sales in 2020

37

PLM - MARKETS

SUSTAINABLE PACKAGING AS A GROWTH OPPORTUNIT Y The organic food category has still room to grow, especially when it comes to packaged products.

«There are categories in which ‘organic’ responds to the demand for healthiness and food safety - explains Pietro Poltronieri - therefore, not addressing them not only would lead to a reduction in sales, but also represent a failure to provide a service to our customers. One of the aspects consistent with the philosophy behind these products, and that represents an opportunity in its turn, is packaging.

Today, consumers expect sustainable packaging with a low environmental impact, where possible and economically feasible, of course. This is another aspect we should work on.»

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MARKETS

- PLM

Green innovation through packaging

C

arrefour Bio line includes different types of value-added products, such as vegetarian readymade meals, prepared mostly using Italian ingredients, as well as, high-energy single-ingredient dried fruit packets and mixed dried fruit serves.

«We’ve added some new interesting products to our range, like the new duopack packaging used for our beef hamburger patties. - explains Mr. Silvestrini - This new design allows our customers to eat one while perfectly preserving the other in the fridge. Furthermore, we’re working on our fruit and vegetable packaging to make it compostable and Fsc-certified.

Of course, these innovative product and packaging choices don’t come cheap, but it’s a cost our company is willing to bear. It sees it as an investment for the future of both our customers and our planet.»

ORGANI C F OOD I S PAVI NG THE WAY TO GREENER PACK AGI NG Sustainable packaging is undoubtedly what brands are working on to expand their organic food supply. «In 2020, organic food sales in our stores saw a negative and more or less flat trend in almost all our sectors, and private label is no exception - states Laura Caramori, Iper La grande i Private Label Buyer. Despite having performed negatively, a less significant decrease was seen in frozen food, dairy products, fruit and vegetables. Our organic line private label includes both basic and premium products. Furthermore, lately our focus has been on the development of greener packaging, which we’re trying to produce using less conventional plastic. In fact, we believe that such change should start from this type of product. We know it’s still a long and expensive process, but we’re sure that it’s the right path.»l

Fabio Massi, journalist specialising in retail and mass market issues.

n n n n

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PLM - FROM THE INDISTRY’S POINT OF VIEW

IT ’ S NOW ANDREA BAT TAGLIOLA’ S TURN, MANAGING DIRECTOR AND SALES GENERAL MANAGER, TO TAKE STOCK OF THE SITUATION WITH PL MAGAZINE.

40

FROM THE INDISTRY’S POINT OF VIEW

- PLM

2 thousands hectares of cultures for

La Linea Verde

by Luca Salomone

One of the leading Italian producers of fresh and ready-to-eat fruit and vegetable products. A point of reference for retailers in different countries, thanks also to seven productive sites located throughout Europe.

L

a Linea Verde of Manerbio, in the Province of Brescia, is a large food company, with a 2019 turnover of 322 million euros (+10% compared to 2018). The business proposal is based on fresh-cut and includes bagged salads, fresh readymade vegetable dishes, and fresh drinks. The company is also one of the most important national fruit and vegetable producers of fresh and ready-to-eat products.

In addition, it is also one of the major growers with more than 2,000 hectares of lands, managed by a single certified and controlled agricultural supply chain system. Talking with PLMagazine, there’s Andrea Battagliola, managing director and sales general manager, to talk with PLMagazine.

The last fiscal year ended with a bang. What about 2020?

First of all, fresh-cut, overall, recorded a drop of -7% with segments that reached even -30% (the salad bowl, intended as ‘lunch box’, for example). In this context, also Linea Verde suffered the blow and didn’t achieve the growth targets set before the pandemic. However we were able to end 2020 with a turnover of group similar to the one of the previous year.

Why has Covid impacted products like yours that are practical and even packaged?

The whole fresh-cut range has been put to the test due to the health crisis because consumption conditions have changed. Consequently, ready-to-eat products had to take a back seat, and the short shelf-life of ultra-fresh products, which in the past was considered a strength, is now a weakness. However, we’re a well structured company able to promptly adapt to changes, and we are now working on larger formats and new references, which could be more suitable for home and family consumption. For us, to cooperate with our clients means also, and above all, being this receptive and flexible.

This crisis was an opportunity to, once again, prove our clients our reliability as partners even in such a difficult moment.

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PLM - FROM THE INDISTRY’S POINT OF VIEW

In 2019 you also entered the Netherlands market.

Were there any other countries of business interest in your 2020 strategic move?

Yes, that’s correct, it ’s the Netherlands, the country where we started to work for an important retailer. Another important news is the opening of a production site in the South of France. Despite the pandemic, some of our foreign clients have expanded their product supply with new proposals. So, let me say that our foreign market, with a share of about 40% of the turnover, never stopped being a source of pride and inspiration for us.

How impor tant are private labels for your group?

They are, and always have been, essential. We were born as co-packer in the fresh-cut market and we are main partners in the sector of the Italian market, and we aim to become so also in Europe in the near future.

What would you suggest to a potential new client for an effective positioning?

Fresh-cut and fresh ready-to-eat meals, in particular, as they generally address a modern, conscious, curious, investigating public. The battle field is of the ‘extra’, extra quality, authenticity, clean label, sustainability of both the supply chain and of the packaging, service, taste. My advice is to rely on a co-packer that can guarantee all of this, in synergy with the brand, which obviously has its own structure, identity, values, projects; all aspects that have to be reflected on its PL. Going from advice to real life, what are the most frequent requests of your current clients?

Given the quality, freshness and taste requirements, there are other two main aspects to consider. The first one is the management of the supply chain, with particular attention towards how farming is managed and controlled, for example in terms of the use of phytochemicals. We respond to all these aspects with a controlled

42

FROM THE INDISTRY’S POINT OF VIEW

322

- PLM

Owned brand: DimmidiSì Sales channels: retail

m euro 2020 TURNOVER

60

More than PL BRAND

SALES OFFICES Italy, Spain, Serbia, Russia and France

5

Produced item per day

2m

PRODUCTION SITES Italy, Spain, France and Serbia

7

and certified supply chain that monitors, tracks, documents all the steps, from farm to store. The second aspect is the packaging sustainability, which has to be 100% recyclable. However, the demand for the use of responsible materials, such as recycled plastic after consumption and FCS (Forest Stewardship Council) certified paper, is higher and higher. These are both important drivers for consumers and distinguish the supply of the private labels.

How can you describe the work done by the large-scale distribution on fresh-cut products?

What we appreciate is that the large-scale distribution, in the last few years, has given more space and importance to the fruit and vegetable products. This also because this area is basically the calling card of points of sale. Fresh convenience has now become more relevant, and so do practical fresh products, such as Fresh cut and fresh ready dishes. More attention is paid to the presentation: there’s a better designed layout, thanks to the category management, and the nutritional messages and consumption tips are more emphasized directly in the store. In other words, I think we’re on the right path.l

43

PLM - THE PRIVATE LABEL SCENARIO…IN UK

UK – Using Private Label for Innovation or as a Competition Tool The UK, with a private label share of over 50%, is seen as a driving force behind new product development and innovation. However it is also seeing private label being used as a tool for retailers to compete with each other over price.

I

t is well recognised that the key reason to develop a compelling private label range is to help retailers differentiate from their competition and to drive customer loyalty.

The UK, with a private label share of over 50%, is seen as a driving force behind new product development and innovation. However it is also seeing private label being used as a tool for retailers to compete with each other over price.

As in most European countries, private label ranges across the UK retailers initially took the standard format of offering “good, better and best” tiering, allowing the consumer to choose from a range of qualities to fit their budget. Most of the “good” tier came in the form of plain white packaging, often referred to as the Value tier. The “better” tier, also known as “standard” tier, was marketed under the retailer’s name and the “best” tier offered premium quality products under branding such as Tesco Finest and Sainsbury’s Taste the Difference. The premium private label tier flourished during 2020 as the UK consumer looked for high quality products that replicated the restaurant

44

THE PRIVATE LABEL SCENARIO…IN UK - PLM

experience they were deprived of due to the pandemic and lockdowns. Premium tier sales grew by an impressive 16.5% in 2020 compared to total private label at 11.1%, according to Kantar.

However, for some years now, the good, better, best tiering structure has been complemented by a raft of product launches within the private label “value added” sector. Retailers have created sub-brands to cover the likes of healthy eating, free from, organic, vegetarian, and regional options. Not only has this resulted in meeting more customer needs and increasing range breadth but it has given retailers the opportunity to enhance margins. In recent IPLC research we saw “value added” private

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PLM - THE PRIVATE LABEL SCENARIO…IN UK

labels selling at an average price index ranging between 193 and 244 compared to the equivalent standard private label product. Despite delays caused by the pandemic over new product development launch processes, the main UK retailers delivered a truly impressive raft of new Vegan and Plant Based private label products in time for “Veganuary” at the beginning of this year. Full bays of products were seen across ambient, chill and frozen categories in many of the top UK supermarkets including Aldi and Lidl. Alongside the already established impressive bays of Free From products, the post pandemic trend of more healthier eating looks as if it will be well catered for.

R

etailers are striving to offer as much choice across their private label ranges in the UK. We are even seeing extensions of the premium tier, in particular at key seasonal times. Aldi are leading here having launched their Specially Selected Exquisite luxury tier over the past few Christmases and, only recently, extending their premium offering in the chill cabinet with Specially Selected Gastro added value meat dishes.

In April, Tesco launched their Finest Restaurant Collection range of three restaurant quality dishes, serving two people at £20-£25 each – indicating there is no limit to the quality or price that private label can offer. Often leading the innovation in private label new product launches, and with a determined focus on offering the best possible quality products and a range that enabled the customer to do a “full shop”, Aldi and Lidl saw rapid growth in the 2010’s increasing their combined UK share from 8% to 14% by the end of the decade. This prompted the big retailers to re-think their strategies, a result of which was Tesco’s significant step in 2016 of launching their “Discounter brands” in a bid to mimic the discounters and halt the heavy switching they we seeing as customers moved to Aldi and Lidl.

Vegan – full bay offerings in Asda and Aldi

Shelf edge talkers in many places 46

T

he discounter brands steadily took the place of Tesco’s former Value range. Many brand names such as Stockwell & Co. and Rosedene Farms were created and designs, sometimes looking quite similar to either Aldi’s or Lidl’s, were introduced. However, specifications of the products did not change and therefore the launch of the discounter brands was merely a re-branding exercise. Pricing matched Aldi and Lidl but only against their value offerings (Aldi Everyday Essentials and Lidl Simply). No significant impact was seen on the growth rates of both discounters. In 2019 Sainsbury’s followed Tesco by launching their own discounter brands. Again, most of these products were simply Sainsbury’s “Basics” Value products simply re-badged.

THE PRIVATE LABEL SCENARIO…IN UK - PLM

No escaping the message!

In a surprise move in March 2020, Tesco launched their “Aldi Price Match” initiative (APM), lowering between 250 and 300 prices to the same pro-rata price as Aldi (and therefore effectively to Lidl as well). A mix across their discounter brands and standard tier private label products were matched against Aldi’s standard tier and a few brands that Aldi sold at the time were also price matched.

Tesco invested in heavy marketing for the campaign and Aldi immediately reacted by reducing their retail price of some the price-matched items. Within 10 days Tesco responded by lowering their price to the new Aldi price. Tesco never undercut Aldi on prices but always followed. Eventually, Aldi seemed to accept the new lower prices across the featured items as no further reductions took place and therefore both retailers sold these items at the same price.

Margins must have been severely impacted. Tesco’s APM prompted Aldi to ramp up their “Swap & Save” advertising, featuring baskets of goods compared specifically to the equivalent baskets in Tesco and claiming 25-30% savings. The number of featured items in Tesco’s APM changed slightly over the following months and, in July, they added over 150 branded products to the initiative bringing the total to over 500 at the time. Tesco price-matched many brands that were being sold by Aldi as part of their “Special Buy” programme (available for a limited period only at very

47

PLM - THE PRIVATE LABEL SCENARIO…IN UK

low prices), and therefore the brands featured in the APM had to change regularly. Aldi’s sales growth in 2020 was behind the market (+8.7% compared to the total market at +10.9%). Although the main reason for this would have been the impact of lockdown and shift to online purchases impacting the discount channel, Tesco’s APM will definitely have also affected Aldi’s performance. It is well reported that many shoppers who left Tesco for Aldi returned, resulting in positive sales shifting for Tesco. In a further surprise move, on 10th February 2021 Sainsbury’s launched their version of the “Aldi Price Match”, using the same title for their initiative.

Tesco wouldn’t have been too happy about that but clearly were unable to register it back in 2020. Sainsbury’s are featuring the initiative heavily in store, online and in the press.

Sainsbury’s entry into the Aldi Price Match arena has raised a lot of questions not least whether they attacking Aldi or Tesco and what their true pricing is strategy going forwards.

S

ainsbury’s will be hoping for a similar impact as Tesco have experienced. Hopefully they will also have done their homework on the cost of such a powerful campaign. And we are not just talking about the obvious lower resulting margins (maybe prompting Sainsbury’s recent supplier letter “to discuss how we can work together to lower prices”), nor the significant marketing costs, but the on-going time and resource costs required to manage a complicated and detailed initiative. It was reported in the UK press that some prices actually rose in Sainsbury’s to match Aldi and some of the comparisons have already been questioned. Teams may have to be employed to manage the comparisons and ensure accuracy, otherwise the Price Match claims could be totally flawed.

It has been reported that Sainsbury’s increased the price of their canned Chicken Curry from a recent 59p to £1.05 to “match” Aldi. What has not been realised, however, is that Aldi’s product has 35% Chicken whilst Sainsbury’s is a Chicken & Vegetable Curry with only 15% Chicken in it. On checking a random sample of 70 Aldi Price Match items featured by Sainsbury’s a few other specification differences were seen, such as more cod in Aldi’s Fishcakes and pork in their Salami. Conversely, Sainsbury’s specification sometimes outshines Aldi’s, such as more

48

Premium – Aldi’s Specially Selected Gastro and Tesco’s Finest Restaurant Collection

THE PRIVATE LABEL SCENARIO…IN UK - PLM

pork in the price-matched frozen Pork Sausages and more egg in their Brioche Burger Buns. Similar differences can be seen in some of the Tesco Aldi Price Match products. Tesco are price matching their Ms. Molly’s 2 litre Vanilla Ice Cream (99p) against Aldi’s Gianni’s at £1.25. Sainsbury’s are matching their Lovett’s at £1.19. Confusion reigns!

A

ldi can genuinely contest some of the Price Match claims due to the lower quality of the discounter brands. Their Smooth Peanut Butter contains near-brand matching 94% peanuts whilst Sainsbury’s price-matched Hubbard’s contains 89% and Tesco’s Stockwell & Co. a mere 87%.

Aldi’s No Added Sugar Apple & Blackcurrant Squash boasts 20% fruit juice content, way ahead of the discounter brands at between 5 and 6%. Its Mushy Peas contain 95% Processed Peas, the same as the leading brand, Bachelor’s, whilst both Sainsbury’s and Tesco’s price-matched contain only 90%. A truer comparison would be Sainsbury’s and Tesco’s standard private label 95% products, both currently selling at 30p, 8p higher than Aldi. Aldi continues to claim significant basket savings against the Big 4. It appears they have not tried to undercut some of the Sainsbury’s price matched products. Sainsbury’s have, for the moment, concentrated mainly on matching own label prices, with only 33 of the 251 listed Price Match products being branded. Aldi’s new headache is that many of Sainsbury’s 250+ featured products are not featured in Tesco’s Aldi Price Match list but are “new entries” in the price match arena - hence Aldi will need to live with even more of their products selling at the same price as at least one of the Big 4. In a recent survey only 6% of those who had heard of Aldi Price Match said they were shopping less at Aldi as a result of the campaigns.

Nevertheless it seems the initiative has helped Tesco win back some shoppers, and it may well do so for JS, but at a high cost in both on-going time and resource. Ultimately the customer will remain confused as products featured, specifications and subbrands change. Maybe the Big 4 should simply take a leaf out of some other European supermarkets’ books. The likes of Edeka, Rewe and Albert Heijn have simply ensured that their own label tier matches Aldi and Lidl in every aspect; quality, packaging and price, stemming the growth of the discounters as a result. However they are now used to a world of lower margins. What is for sure is the correct positioning of private label ranges is crucial in the on-going battle to win customer loyalty and sales growth.

Paul Stainton, Partner IPLCUK International Private Label Consult

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PLM - MARKETS

Cosmetics and personal care products in the times of the pandemic

by Fabio Massi

The profound changes caused by the current global health emergency have also influenced the cosmetics and personal care industry. While the drastically reduced social interactions have negatively affected product categories in the ‘beauty’ sector, concerns about the infection rate have led to a sales growth of sanitizers and personal hygiene products. In fact, according to the data published by Centro Studi Cosmetica Italia, in the second half of 2020, although fragrance sales declined (over -20%), the consumption of both liquid

50

n n n n

The increasing interest of consumers in natural and sustainable products led large-scale distribution brands to widen their private label supply

MARKETS

- PLM

soaps (+38%) and at-home hair dyes (+30%) rose. Furthermore, the frequent use of face masks and hand sanitizers resulted in a more specific demand for face and hand creams. Consumers’ attention to natural and sustainable products is also increasing; a trend reflected in the wider range of private labeled products now offered by largescale distribution brands.

+16.3%

Sales growth of personal care products in Crai points of sale in 2020.

+2.1%

In 2020, D.it mainstream and green-oriented specialized lines recorded a significant increase, + 2.1% percentage points.

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ADVERTISING

The growth of the Moroni Amato Group Specialized in the production of household cleaning detergents, thanks to many years of experience, professionalism and continuous ability to renew, we have reached a prestigious position on the Italian market.The extraordinary performances recorded in the last years confirm the constant growth trend, the result of a winning vision due to the continuous innovation of products and production processes.

The year 2017 was marked by the acquisition of Euthalia Cosmetics, a young and dynamic company specialized in beauty and body care products. In 2020, Cosmetec Innovating Cosmetic Products also joins the group, which core businesses are make-up products intended not only for selective perfumery, but also for brand names for the large-scale retail channel. The brands that have contributed most to the extraordinary growth of the Group are Coccolatevi (leader of market among liquid laundry perfumers -IRI Census Infoscan Tot. Italia + Discount A.T. 12/2020-) and Bioxcare (complete line of disinfectant and non-disinfectant products for personal and home hygiene). The constant growth was supported both by the development of its own brands and by the strong vocation to produce brand

names for home care, personal care and make-up products. Several Italian and foreign brands have established and consolidated close collaborations with us that allowed us to grow with them. Our high quality, process, environmental sustainability, safety and product standards are certified by the most renowned international institutes and the constant and frequent checks carried out by our partner customers. The process of reducing the environmental impact began with the creation of the Zero Impact brand, produced with 100% recycled packaging and ingredients of natural origin.

Nowadays the company mission is make the product innovation coexist with the environmental sustainability: a commitment which we hope will benefit all of us and future generations.

RSPO-9-4082-21-000-00

MARKETS

HYGI ENE AND SUSTAI NABI LI T Y DRIVING CONSUMPTION As reported by Nicola Hyeraci, D.It PL Category Manager, the analysis of sales data and market basket composition suggests that the growth in such industry was driven by the increasing demand for sanitizing and disinfectant products, on the one hand, and for environmentally friendly and safe products on the other. Specifically, such green products not only continue to be a popular choice among consumers but are also becoming the most common items in the market basket. «It’s also our PL that confirms these trends. In fact, speaking of PL products in the network’s points of sale, we’ve recorded a significant increase in both our Sigma, Sisa and Coal mainstream lines, and our VerdeMio green-oriented specialized line. After a year into the pandemic, we have managed to record an increase by +2.1% percentage points despite such product categories having always been complicated for private labels» explains Mr. Hyeraci.

CO M PARING PR IVA T E L A B EL S

+

- PLM

+13.5% growth in value terms and about +8% in volume terms Sales growth of personal care products in Todis points of sale last year.

13% of turnover

Percentage recorded

by Risparmio Casa Pls that are experiencing an upsurge.

VALUE-ADDED BRANDS PL is vital for Risparmio Casa in terms of customer loyalty, providing an alternative to commercial brands. «What distinguishes us from opportunist competitors - explains Luca di Parma - is the fact that we manage different private labels from a producer’s point of view, following the whole process, from production to marketing. As for personal care products, we collaborate with several brands, two of which are value-added. There’s Creative Studio, launched at the end of 2019 and specialized in hair care, which offers a range of semi-professional products, and Selya brand, characterized by a wide choice of face and waxing products that include different high-quality face masks, scrubs and accessories with an interesting price positioning.»

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MARKETS

- PLM

Segments ups and downs -20% fragrances

+38% liquid soaps

+30% at-home hair dyes Source: PLM analysis based on Centro Studi Cosmetica Italia Study Center, 2020.

GREENER PACK AGI NG AND COMPOSI TI ON Personal care and hygiene remain daily needs regardless of current consumption trends, that brands are addressing by offering safe, innovative and greener private labeled products. «In 2020 we recorded a significant growth in the personal hygiene sector, corresponding to an increase by 13.5% in terms of value and about +8% in terms of volume. This is the result - explains Francesco Iuculano, Todis General Manager - of greater attention to segmentation in relation to shelf positioning, as well as, to the introduction of sustainable products, which are environmentally friendly, both in terms of packaging and composition, also in this product category. In this regard, we would like to point out the great success obtained by our Gently and Gently Baby lines for personal care, which include formulations with biological extracts and bottles made in R-Pet with recycled plastics.»

I NCRE A SI NG I NVEST MENT S I N RESE ARCH AND DE VELOPMENT Sustainability and the other values of cosmetics and personal care private labels are the result of mass retailers’ research aimed at developing products that combine price convenience and quality. «Private and exclusive labels represent 75% of our turnover. It’s an area we’ve been trying to revolutionize by heavily investing our resources and implementing a multiannual investment program also addressed to Research and Development. The ultimate goal is to reorganize most of our supply. The Italian spirit of our products plays a vital role in the R&S of our PLs, as we aim to establish long-lasting collaborations with our suppliers and implement purchasing policies that don’t include auctions, thus promoting local economic growth and made in Italy products. To date, 97.5% of our PL suppliers are Italian and about 97% of our products are produced in our country,» says Francesco Iuculano.

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PLM - MARKETS

PRIVATE L ABELS IN LINE WI TH THE CATEGORY According to Luca Di Prima, Risparmio Casa Head of Strategic Planning, personal care products sales in the points of sale of the chain performed very positively in 2020, recording a +5% increase in terms of volume and +14% increase in value terms compared to 2019 (Nielsen data). «The increase in terms of value becomes particularly significant if compared to self-service specialist drug performances (+2.5%). It’s even more remarkable if we consider that personal care products, despite playing a key role, represent two thirds of the channel’s sales, but only about 25% of our turnover. In line with the category, the sales of our private label products are seeing an upward trend, accounting for over 13% of our turnover. This is very significant, especially when compared to the self-service specialist drug channel, where private label accounts for just below 6% of the total,» explains Mr. Di Prima.

ROCKETING ONLINE PURCHASE The year 2020 also saw a considerable growth of online cosmetics and personal care sales. E-commerce revenues for these products closed the year with +42% compared to 2019 and it is expected to grow further over the next six-month period (+40%). «Last year personal care products sales in our stores experienced a growth of +16.3% - says Loretta Zecchin, Crai Secom PL buyer for beverages, self-ser vice specialist drug, pet food and non-food - but we can say that the pandemic has drastically affected consumers trends overall. 2020 was definitely a very complicated year, really out of the ordinary.

A “green-oriented” product line Consumers are now more conscious buyers who tend to choose high-end products that respect the environment. «VerdeMio was created to meet the needs of green-oriented consumers looking for quality, sustainable and safe products - explains Nicola Hyeraci, from D.It - .The line includes body wash, shampoos, intimate wash and liquid soaps that are part of the high-end commercial supply of organic/eco-friendly products of our brand’s PL. The added value of these products is their composition, which is clearly described on their label. In fact, we only use safe and natural ingredients, such as organic raw materials, that don’t contain parabens, surfactants nor colorants. Furthermore, we’ve opted for 100% recycled PET for their packaging.”

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MARKETS

- PLM

The changes in consumption trends in the retail sector considerably redefined the importance of local stores and e-commerce. Thankfully, we managed to address such changes thanks to our local points of sale and Crai Spesa Online e-commerce platform.»

PRODUCT S I N T UNE WI TH NE W CONSUMERS’ NEEDS In the course of 2020 - adds Ms. Zecchin - the supply of large-scale distribution brands reflected the greater attention paid to product mix, as well as the new habits of shoppers. «What we usually consider to be the most important driver for us is careful product management through a category management strategy. The aim is to offer our customers a range of products that is aligned with market trends and meets their new needs, which are nothing but one of the consequences of the pandemic. It’s something we’ve been working on in the last months, for example by expanding our line of disinfectants and medical devices for both personal and home hygiene.»l

+3.7%

Sales trend in value terms

+3.2%

Sales trend in volume terms

Source: IRI data, Hyper+Super+Mini-marts+Self-service specialist drug, Discounters, Tot. Italy, 2020

n n n n

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