Wednesday, July 28, 2021

Private labels: a crucial and growing area for grocery retailers

Christophe Vanackere is the CEO of Trace One, the global specialist in collaboration between suppliers and retailers for the development and marketing of private label products. He discusses the explosion of these products in recent years, the sector's strong growth prospects, and the fact that private labels have enabled the grocery retail industry to reinvent its business model.

The importance of private label for retailers

It is a Copernican revolution that has taken place in the world of mass distribution over the last ten years. Private label products, which were once perceived as a cheap second best, have become increasingly important staples in the consumer’s shopping basket. These standard staples have gradually evolved into mid-range, organic and premium products, to the detriment of the major national brands. This revolution can be explained by the fact that the private label has opted for innovation and originality in order to offer differentiating quality products with a private label logo. 

This market, which has long been the monopoly of the major brands, now provides visibility and high added value to retailers. Private label products are now the gondola heads of mass distribution. They offer retailers brand visibility and new added value. Far from being content to simply put products of major national brands on the shelves and market them, they are now developing their own product lines that allow them to differentiate themselves. In this respect, private labels have become crucial for the image of the major retailers, but also for the development of their business. This helps build customer loyalty through an increasingly innovative brand with a strong identity.

A virtuous revolution coming from the growing power of consumers

If distribution has been able to seize the opportunity that private labels represent, this revolution is essentially the result of a major social movement originating from consumers themselves. After years of gigantism and a frenzied race for low prices (more for less), the French have been making a profound return to more sustainable, ethical, and healthier consumption patterns for a decade. These concerns are at the heart of the rise of private labels. Retailers have opted for innovation, local goods and wellness, to offer product ranges adapted to each sector and to all budgets, with the immense advantage of being able to guarantee consumers the origin and control of the products offered, and above all to be able to communicate about them in its stores. I remember many experts shrugging their shoulders when Intermarché decided to invest in its own fleet of fishing boats, or when the Système U group committed to sourcing exclusively from local producers. These brands were pioneers, however, and this type of behavior is growing rapidly today.

As such, private labels have contributed to radically changing the image of distribution, which in less than ten years has gone from being the gravediggers of small producers to their main support. Today, the products that arrive on the shelves of French supermarkets are fresh, healthy and local. Mass distribution can guarantee the origin of all private label content and has clearly integrated a virtuous circle for the planet.

Consumers want to eat local, fresh, seasonal, with a good quality/price ratio. They also want to include the agricultural world in their thinking. All these parameters are considered by distributors, which explains the growing number of associations and partnerships with small local producers. Many retailers now even attain 100% French origin. Industrialization at all costs and mass production are of less and less interest to French consumers and with it the attached methods of distribution. Price is no longer the only variable. People are ready to consume less to eat better.

Nutri-Score franch system. Color scale ranging. Sign health care for packaging

One of the concrete elements of this consumer revolution has been Nutri-score (but also initiatives such as the Bleu Blanc Coeur association), which has shaken up distribution and forced it to improve its products. Beyond France, product quality has improved in all the countries that have adopted it. In Germany, which lags far behind France in this area, distributors are now paying close attention to the arrival of Nutriscore.

Strong growth, further accelerated by the pandemic

The rise of the food private label is a reflection of what happened fifteen years ago in the world of fashion with fast fashion (H&M, Zara, etc). In both cases, very rapid growth linked to new capacity for innovation is shaking things up. The consumers of 2021 change quickly and are very demanding. They move rapidly from one brand to another and from one purchasing mode to another. They want to be efficient in what they buy, and distributors must not only offer them unique products (which they cannot find elsewhere), but also continually surprise them. 

Private labels allow for loyalty while continuing to innovate. For several years now, private labels have been growing at an annual rate of 2 to 3% in France. These figures obviously exploded in 2021 with the health situation (it is estimated that the sector’s growth will be 6 to 8%), which in this context will have been a catalyst for sustainable change in distribution. The rise of private labels is also expected to accelerate further in the coming years. In Europe, we are at a penetration rate of 35%, which is already significant, but we should reach the 50% mark within 3 or 4 years. In the United States, the penetration rate of private labels is 23% and will rapidly rise above 30%. There is still huge room for improvement in all markets.

To help retailers take this turning point in private labels, we at Trace One support them in all their needs from idea to shelf placement. We have developed a suite of applications within a single, inclusive platform. These offer users the opportunity to collaborate to innovate, follow specifications and ensure safety and quality, discover innovative products, identify reliable suppliers, and manage tenders from a single space. Each of our applications plays an essential role in the product life cycle and can be used independently. But together they give brands a truly remarkable advantage. Our Marketplace brings together more than 5,000 suppliers with the majority of the major retail players in France, Europe and the world, enabling them to develop innovative private label products of tomorrow. 

Trace One helps retail players large and small, to find innovation and quality wherever they are, and FMCG suppliers to showcase their products and know-how. Acting as a cog between the two is exactly the expertise we have been putting at the service of our customers for 20 years, with one priority: the satisfaction of the customers who trust us.

SourceTrace One
- Advertisment -

Latest News