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Private label innovation looms over big brands

By Jess Halliday , 19-Mar-2009
Last updated on 20-Mar-2009 at 12:56 GMT2009-03-20T12:56:00Z

Innovation is increasingly being marked out as a way for private label firms to gain market share – and for big brand players to keep it.

As shoppers are seeking out cheaper deals for their food and drink supplies, private label products are accounting of ever larger proportion of sales. In its latest Data & Trends report, published this month, the Confederation of the Food and Drink Industries of the EU (CIAA) also noted the shift in consumer spending towards private label goods. It said that the share of private label markets has reaches as high as 48 per cent in traditional retailers, and 94 per cent in discounters.

Between 2006 and 2007, almost every top 30 retailer in saw an increase in private label share – and the indications are that private label has become more popular still since the financial crisis tipped Europe into recession.

In response to a ‘Chewing the fat’ podcast by the FoodNavigator team this month, Tony Keller, president of US innovation company Tandem Rain, which works with both brands and private label, said “Private label brands are now innovating products, not just copying – they aren’t afraid to put them on the shelf.”

He added that a marginally successful product is totally acceptable, whereas brands will only introduce innovations that are sure to be a total success.

“That leaves everything between marginally successful and totally successful open for the Private Label brands. That is a lot of successes.”

Innovation will also be the central theme of the annual trade show of the Private Label Manufacturers Association in Chicago in November this year. For the first time, the show will have a dedicated ‘Innovation Hall’.

Brian Sharoff, president of the PLMA, said: “The Innovation Hall represents the next logical step in the evolution of store brands… as business gets larger, more complex and demanding, there is a strategic need by both retailers and manufacturers for more than just products.”

The hall will contain exhibits from companies offering a range of services, including lab testing and quality certification, market research and consulting, packaging design, software, equipment, financial services and sourcing services.

New lines at Waitrose

This month UK supermarket Waitrose re-designed and expanded its private label offering under the Essential name, which now consisting of over 1400 stable grocery lines. Crucially, the upmarket retailer is seeking retaining its differentiation on quality, despite cutting costs.

It says the Essentials grocery goods have “the quality and welfare standards you would expect from Waitrose - at prices you wouldn’t”.

Although quality and welfare standards may not be exactly innovation, consumers have perceived private label goods as a quality trade-off.

The announcement of the new range came just days after Mark Price, Waitrose managing director, addressed the British Council of Shopping Centres (NCSC) Management Conference, saying that businesses need to choose between bringing down the cost of business, and investing in quality.

“Bringing down the cost of business can create a vicious circle, resulting in poor quality, dissatisfied customers, and ultimately, less money spent in stores.

“An alternative is to become more focused on innovation, creativity and growth.”