Store Brands as Innovator, Not Follower

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August 5, 2009

By Maureen Azzato

While the fragmented European market is extremely different from the vast expanse of the United States, Mintel's Lynn Dornblaser believes there is a lot to be learned from European pioneers who are taking store brands to new heights.

"What's new in how we talk about private label is referring to private label as an innovator, not a follower, starting in Europe," said Dornblaser, Director, CPG Trend Insight for Mintel. "Private label is not just economy and generic black-and-white products any more."

Store brand sales "have not peaked in most markets, and continue to grow faster than most manufacturer brands," Dornblaser said, adding that growth is building on a combination of convenience, competitive pricing and product innovation. "Differentiation and segmentation are providing extensive consumer choices."

During her recent presentation at the FMI Private Brands Summit in New York, Dornblaser highlighted a number of notable European retailer innovations, including Marks & Spencer's Steam Cuisine meals, Sainsbury's use of Tetra Recart packaging for some of its food products, DM's color-changing toothpaste for kids and Migros' first dual-chamber laundry detergent.

Steam Cuisine was the first to incorporate a valve in the food packaging to release steam while microwaving, making it the first to introduce "the whole concept of a microwave to steam food," Dornblaser said.

Sainsbury's use of squared-off cutting-edge Tetra Recart packaging for some of its food item is worth keeping an eye on, she added, because of its earth-friendly and compact shape and space-saving attributes.

For those unfamiliar with Tetra Recart packaging, it is specially designed for products that would be traditionally pack in cans, glass jars and pouches. "It's the world's first retortable carton-based processing and packaging system designed for shelf-stable food products ...that can be sterilized inside the carton package, which makes them shelf stable up to 24 months," according to the Tetra web site. Tetra is also "based on renewable resources for recycling and minimal environmental impact."

According to Dornblaser, the U.K has long been a pioneer in the development of store brands, especially segmentation of store brands with four to six, or more, sub-brands "that address every single part of the customer base."

Tesco, she said, is great example of how sub-brands can be optimized. Mintel groups Tesco's sub-brands into four big segments -- healthy, natural, convenient and premium/value, "but even within each of those areas there are different sub-brands," Dornblaser pointed out "Healthy, for example, has Healthy Living, Light Choices or Free From lines."

The other major difference between U.S. retailers and many in Europe is that most U.S. retailers do not put their store names on their store brand products. For example, all Tesco products carry the Tesco name on them.

"That might be something to consider, something that's missing perhaps from some private label brands in the U.S market," Dornblaser said. "There are an awful lot of products in the U.S. that appear not to be associated with any retailer at all. Wouldn't you think if you've got these unique offerings that are a draw to consumers that you would want to make sure to tell consumer that you can only get them in your stores?"

Some products in the U.S. are beginning to mimic the U.K. especially in the meals category, such as Supervalu's Culinary Circle, Wegmans Food Markets' Travels of India and Food Lion's Taste of Inspirations, according to Dornblaser. "This can be good and bad because that market is very different and like-for-like reproduction probably is not recommended," she cautioned.

"Private label has developed much differently in the U.S. and has traditionally focused on generics at low price and [low] quality," Dornblaser said. However, future expansion is more focused on the premium tier, unlike the U.K., which is focusing on the discount tier, she added.

Packaging also is vital to success: "Make sure [your products] look as good as they taste. This is very important because there are still lingering perceptions of those generics of the past."

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