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| 11.05.04 | |
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"The battle should be around
innovation, not price"
How Spain's manufacturer
brands are feeling the heat from own label.
| In Spain, retailers are increasingly gaining ground on
the manufacturers. Experts warn that the latter need to look to innovation if they are not
going to get left behind. Last year, own label brands (or, as they are known in Spain, "marcas blancas") had a market share of 27%, three points higher than two years ago, according to data from market auditors IRI. A recent study by PriceWaterhouseCoopers (PwC) attributed them an even higher share and claims that such brands will account for 40% of the market within three years. In all, sales of own label (or "private label") products amounted to 7,037 million euros during 2003, attaining a market share of 30% in the Mercadona supermarket chain, 22% in Eroski, 21% in Carrefour and 15% in both Alcampo and Caprabo. |
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According to IRI, such goods are gaining most ground in supermarkets with a floor space of between 400 and 1,000 square metres. In such stores, which include discounters such as Dia, Lidl and Plus Superdescuento and where own label products maintain a significant presence, their share amounts to 31.95% of sales. Hypermarkets have a much lower proportion, of around 18%. Supermarkets Eva Vila, marketing director of IRI, explains that: "the supermarket chains, like Mercadona, have launched their own brands and these are of a quality very similar to that found in manufacturer brands, but at a much lower price. This, linked to the fact that Spaniards are increasingly looking to spend less on their food, means that own label is becoming unstoppable." Own label brands currently represent 37.5% of sales of cleaning materials and 31.1% of fresh foods. IRI points out, moreover, that in some categories, manufacturers hold a minority share. Trade brands account for 76.5% of sales of cooked meat products and 73.7% of disposable paper. Own label penetration in Spain is now among the highest in Europe, ahead of countries such as France, Holland and Italy. The largest market for such products is in the United Kingdom, where they hold a 37% share of total sales and, in some store chains, the proportion is over 50%. According to Vila, the solution is not an easy one for the manufacturers. "In my opinion, the battle should not be around price, but innovation. That's an area where consumers continue to favour leading brands", she says. IRI's marketing head nevertheless considers that: "in contrast to the opinion of PwC, I think own label is already beginning to reach its limits and it will never go above 35%. If it were to, there would be saturation." Most of the leading retail chains agree with Vila. Agustín Ramos, director of institutional relations at Carrefour, recently said that: "the share of our own label is currently 21%, an acceptable level that we do not want to go above." Alcampo is saying similar things. According to a spokesman for the group, which uses the Auchan own label name (the name of its French owner), "the latest studies recommend that one doesn't go above the figure of 20%." Carrefour, the most active Carrefour has been one of the most active companies in recent years in the introduction of own label products. The French hypermarket group operates one brand for the cheapest products, Uno, another for regional delicatessen items, De Nuestra Tierra, one for ecological products, Carrefour Eco and another for those over which total control from source is maintained, Calidad Tradicion Carrefour. In addition, the company has clothing brands such as Tex and a line of electrical appliances which sells under the First Line name. Among the supermarket chains, there is a significant difference between the two largest operators, Mercadona and Caprabo. Based in Valencia, Mercadona's proportion of own label goods is as high as 30%, while those of Caprabo, based in Catalunya, are no more than 10%. Both assert, however, that they are happy with the current state of affairs. Caprabo, which has just launched the Alcosto brand for its cheapest products, already operated the Caprabo brand, but is an exception in the sector. "In our company, we look, above all, to offer variety and a wide offer, so while we have our own brand for quality goods sold at lower prices, we have no intention to increase the amount of such goods we sell, which has remained constant for years. Identification When presenting product, most chains opt not to identify the name of the manufacturer on the label. Though there are some exceptions, like Mercadona and El Corte Inglés, most consider it sufficient that the products carry their name. Caprabo, for example, maintains that "in our opinion, the fact that they carry our name is enough because we believe that to be a sufficient gurantor of quality." Eroski, which uses the name Consum for packaged products and Consumer Natur for fresh products, insists that "consumer perceptions of value are so positive that, when there was the problem of mad cow disease, sales of our Consumer Matur meat shot up." Manufacturers prefer to remain cautious, although will admit they are worried. "In a few years, there'll just be the own label brand and two leading manufacturer brands" is an opinion repeated various times by Jesús Salazar, chairman of the SOS group. |
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