Using the Store Banner to Endorse Private Label Architecture

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June 14, 2011

By Koen de Jong

Market share for private label in the European market are still by far the highest in the world -- well over 35 percent in nine countries. Retailer consolidation resulted in fewer but more professional players and increased competition. Retailers there use their economies of scale to create multi-layered private label architecture, which allows them to differentiate from the competition. Larger and deeper private label lines were created based on themes that respond to concerns in society (such as organic, fair trade, animal welfare and eco-friendly).

Although the economic downturn accelerated private label growth in Europe, there was another key driver -- retailers started to brand their stores. Over the past 10 years, retailers’ key objective was to differentiate themselves from the competition and create shopper loyalty to the store. The visual identity of the store has become very important and private label was assigned a central role in developing this. Almost without exception every retailer in Europe now uses its store banner to endorse its private label offering. Fancy labels that did not refer to the store banner have all disappeared and replaced by attractively designed packaging carrying the name of the store.

Our company was involved in a project where we assisted a retailer redesign its packaging from a fancy label into a store banner brand. The results were astonishing and surpassed expectations. By using the name of the store on the packaging this retailer successfully capitalized on its solid reputation in the market. The new label even performed well in categories in which consumer packaged goods brands are traditionally strong. Also, in categories with a very strong position of the number one 1 brand, or a high degree of brand innovation, the new label performed much better.

Private label packaging design is an important success factor for their performance on shelf and therefore of great importance to retailers. Of all customer communication, private label is the most conspicuous. The packaging design makes the retailer’s identity tangible and keeps the retail brand visible. As a ‘silent salesman’ it navigates the shopper in its decision making process in the store and continues to promote the store during the span of its use in the home. It is therefore extremely important that retailers use the store banner as the retailer brand, and use clear and consistent designs for their packaging.

Another example is the successful repositioning of Albert Heijn’s (Ahold in the Netherlands) private label. In early 2000 the market share of Albert Heijn was in dramatic decline. In a strategic reorientation the company recognized that private label packaging design was a powerful tool to successfully complete the repositioning process. To draw customers’ attention, each of the 4,500 SKUs was redesigned to support the new identity of the store. This was a powerful communications tool that would reach from the store into the consumer’s home. With the creation of new packaging design, the new visual identity and the powerful price campaign, Albert Heijn repositioned itself as a trusted grocer and its market share grew from 22.8 percent to a staggering 33.5 percent in seven years.

It has become increasingly difficult and expensive for CPG manufacturers to message to consumers and effectively communicate the emotional value of their brands. Iconic brands have to compete with private label equivalents of comparable quality. The retail owners of these brands invest massively in building and managing their brand image and trustworthiness, and typically allocate the best position on the shelf to their products.

Increasingly, innovation in Europe comes from retailer private label and not from CPG brands. Retailers use their stores as a test laboratories and trial new products or packaging formats. With a high degree of ‘trial and error’ products flow in to be tested. The store banner name on the pack tells the story and should create the necessary shopper awareness. The products are hardly promoted on an individual base. If successful, they stay and if not, the products are delisted without much harm done or loss incurred since most of the costs are rolled down to the private label manufacturer.

Koen de Jong is founder and CEO of IPLC. He held various commercial and general management positions at leading manufacturers of private labels in the United Kingdom, Germany, France and the Netherlands. de Jong is fluent in English, French, German and Dutch (mother tongue). Since 2003, he has been working as a consultant for a large number of manufacturers and retailers in Europe and beyond. He has published two books: Private Labels in Europe, Trends and Challenges for Retailers and Manufacturers (2007) and Private Label Uncovered: Taking Retailer Brands to the Next Level (March, 2011). For more on deJong go to www.iplc.nl.

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