Private Label Congress 2014

Winning the private
label end-game
Private Label Congress 2014
Driebergen, March 11, 2014
The rise of private label and threatened position of traditional
retailers is putting A-brands under pressure
Dutch food retail market 2013 [EUR bn]
25.8
5.6
7.4
Rise of private label
Private label
B
A
A-brand
Rise of challengers &
channel innovation
Traditional
retailer1)
Other2)
Challengers
& new channels
Increasing pressure
IMPLICATIONS
> Traditional food retailers are
under pressure:
– Rise of food retail challengers
puts turnover under pressure
– Rise of online decreases
margins (or turnover if not
captured by traditional
retailers)
> A-brands are under pressure:
– Rise of private label (partly via
discounters) decreases sales
– Rise of online decreases
margins
1) Excluding hard discounters Lidl & Aldi; 2) Including bakeries, butchers, night shops, markets, etc.
Source: GfK; Nielsen; Roland Berger analysis
140307 Private Label Congress 2014.pptx
2
A Rise of challengers and channel innovation
Upcoming challengers and channel innovation threaten the position
of traditional food retailers
Developments traditional food retailers
1
5
Online
Traditional food
retailer
4
Source: Roland Berger analysis
Niche players
Dump retailers
3
2
Non-food
Discount
140307 Private Label Congress 2014.pptx
3
A Rise of challengers and channel innovation
Niche players, such as Marqt and Ekoplaza, are claiming their place
with a focus on fresh local products
1
Developments traditional food retailers
1
Niche players
"Ekoplaza has to move due to
rapid growth"
Number of stores for
selection of niche players
Retaildetail,
September, 2013
+32
52
25
20
3
14
9
18
3
2010
Ekoplaza1)
"Marqt wants to open its doors
outside large cities"
Het Parool,
September, 2013
2013
Marqt
Estafette (Odin)
1) Excluding the 40 additional stores transferred from Natuurwinkel (Wessanen) to Ekoplaza in 2011
Source: Retaildetail; Het Parool; Company websites; Roland Berger analysis
140307 Private Label Congress 2014.pptx
4
A Rise of challengers and channel innovation
Non-food retailers increasingly are selling food products through
new retail channels
Developments traditional food retailers
2
2
Non-food
Food maneuver of non-food companies
> Growth of shop-in-shop
Delimarkets
> Launch of separate, specialized
food shops
# of
Delimarkets
in NL
20
6
2010
2013
> Sales of typical Swedish food
products
> Retail sales via LaPlace (e.g.
coffee beans)
Source: Roland Berger analysis
140307 Private Label Congress 2014.pptx
5
A Rise of challengers and channel innovation
The total market share of hard discount retailers have increased in
the Netherlands – Lidl partly takes over Aldi's share
Developments traditional food retailers
3
3
Discount
Market share of hard discounters in the Netherlands [%]
3.5%
16.4%
12.9%
7.4%
8.9%
9.0%
4.0%
2007
Source: Distrifood; IRI; IGD; Planet Retail; Roland Berger analysis
2013
140307 Private Label Congress 2014.pptx
6
A Rise of challengers and channel innovation
Dump retailers such as Action and outlet supermarkets are
expanding
Developments traditional food retailers
4
4
Dump retailers
Rise of Action
Rise of dump supers
Total sales [EUR bn]1)
+18.0%
718
873
"Dump supers jump in
the gap below Lidl with
leftover products"
1,000 Super
market
segment
Total number of stores
+22.7%
269
321
2011
2012
405
Food examples
FD,
February,
2014
2013
1) Total sales number 2013 is an estimate
Source: Action; FD; Roland Berger analysis
140307 Private Label Congress 2014.pptx
7
A Rise of challengers and channel innovation
Online will continue to replace offline: ~30% of retail food is
expected to be purchased online in 2030
Developments traditional food retailers
5
5
Online
Turnover of food retail in the Netherlands [EUR bn]
Online sales in 2030 is comparable with the combined
sales of Albert Heijn, Lidl, Aldi and C1000 in 2010
51.4
39.2
1.5
43.0
6.4
47.2
12.7
15.4
37.7
36.5
34.5
35.9
2010
2015
2020
2025
2030
Online
Shop sales
35.6
0.4
15.4
Source: Roland Berger online retail study
COMMENTS
No pure play
online players
(like Ocado)
in the
Netherlands yet
140307 Private Label Congress 2014.pptx
8
A Rise of challengers and channel innovation
The sales growth of discounters and other challengers in the last
three years equaled the sales of all Spar & Vomar supermarkets
Change in retail food sales of challengers and online retailers 2010-2013 [EUR m]
28%
25%
7%
59%
10%
33%
13%
1,657
461
461
251
1,196
739
#%
1,196
Comparable to
current sales of all
288 supermarkets
of Spar & Vomar in
the Netherlands
combined
96
109
Niche
players
Comparable to over
3% of total food
market in 2013
Non-food
retailers
Discount
Dump
retailers
Total
challengers
Online
retailers
Total
CAGR 2010-2013
Source: Roland Berger analysis
140307 Private Label Congress 2014.pptx
9
B Rise of private label
Private label has gained substantial ground
Value share private label in Dutch supermarkets [%]
+4.5%
31
29
18
33
27
21
22
43
28
28
45
30
33
34
35
24
2003 2004 2005 2006 2007 2008 2009 2010 2011
Excluding hard discounters
Source: GfK; IRI; Roland Berger analysis
DRIVERS PRIVATE LABEL
GROWTH
40
40
39
37
35
45
2012 2013
Consumers:
> Improving quality due to rise of
premium private labels
> Recession, increasing price
consciousness
(PL prices are on average 30%
lower)
Retailers:
> Pressure on margins
> Increasing innovation at
Private label manufacturers
Including hard discounters
140307 Private Label Congress 2014.pptx
10
B Rise of private label
Private label expansion is an international phenomenon driven by
private label's attractiveness to both retailers and consumers
Expansion of private label
Intrinsic benefits for retailers …
… as well as consumers …
Lower retail price, higher retailer
gross margin
"Private label price-quality is better than
an A-brand"
- 51% of Dutch consumers
Retailer gross margin
A-brand
25% 100
-15%
retail
price
Private label
35% 85
Share of consumers perceiving
standard PL line as least as good as
A-brand is 30 to 42%:
42%
34%
32%
Differentiator driving better market positioning
30%
30%
Source: GfK; Euromonitor; Roland Berger analysis
140307 Private Label Congress 2014.pptx
11
B Rise of private label
The eventual market share of private label varies per category
Private label categories
Public showplace
Beers
Hair coloring
Liquor
Depilation
My privacy
My own security
Bottled water
Fortress of brands (<20% PL)
Laundry
Confectionery
Baby food
Open battlefield (20-40% PL)
Swamp of commodities (>40% PL)
Source: Roland Berger analysis
My own indulgence
140307 Private Label Congress 2014.pptx
12
B Rise of private label
In food, the leading brands are most affected by the uptake of
private label; tail brands frequently keep 20-30% market share
Private labels vs. brands in mature markets, value shares – Food1)
Private
label share
Private label
>40%
Brand Brand Brand Other
#1
#2
#3
brands
4%
12%
57%
21%
Relative
market
share #1 / #2
2.0
THE SWAMP OF COMMODITIES
˃ No room for any true leading
brand: leading brands serve 2030% of total market
2.1
OPEN BATTLEFIELD
˃ #1 brand reaching 20-30% market
share, adjusting towards #2
˃ #3 and other brands together
remain close to 40%
6%
20-30%
<20%
25%
26%
5%
42%
12%
19%
7%
11%
30%
23%
2.2
FORTRESS OF BRANDS
˃ Room for two leading brands,
together reaching 60% of the
market
1) Based on an analysis of 30 food categories in four mature markets, averages are shown but many different situations exist on the category level
Source: Euromonitor; Roland Berger analysis
140307 Private Label Congress 2014.pptx
13
B Rise of private label
In non-food, market leaders can maintain 25-30% market share
regardless of private label maturity
Private labels vs. brands in mature markets, value shares – Non-food1)
Private
label share
Brand
#1
Private label
>30%
<20%
24%
40%
20-30%
30%
23%
5%
29%
Brand Brand Other
#2
#3
brands
16%
12%
17%
10%
7%
7%
17%
23%
40%
Relative
market
share #1 / #2
2.0
THE SWAMP OF COMMODITIES
˃ #1 brand remains strong
˃ Still room for secondary brands
1.8
OPEN BATTLEFIELD
˃ Leading brand at around 25-30%
share, very often fighting against
solid #2 brand
1.8
FORTRESS OF BRANDS
˃ Room for three leading brands
reaching 55% of market share;
other brands remain high
1) Based on an analysis of 20 non-food categories in four mature markets, averages are shown but many different situations exist on the category level
Source: Euromonitor; Roland Berger analysis
140307 Private Label Congress 2014.pptx
14
B Rise of private label
Private label is one of the causes for moderate growth or even
decline of A-brand producers
European sales growth of FMCGs
Total food retail market
grows moderately…
…which is reflected in the growth of top FMCGs
CAGR Western Europe 2007-2012 [%]
CAGR Europe for selection of top players 2009-20131)
Ice cream
Bakery
2.1
0.2
Dairy
Confectionery
Soft drinks
Unilever
1.8
Nestle
0.6
0.4
0.1
-1.8
Danone
P&G
3.3
-3.0
5.9
Coca Cola
1) Growth figures not corrected for acquisitions and divestitures. In case not available, CAGR of similar time span in same period is used (e.g. 2008-2012 or 2010-2013)
Source: Euromonitor; Thomson One; Roland Berger analysis
140307 Private Label Congress 2014.pptx
15
C Pressure on profit pool
The rise of private label and threatened position of traditional
retailers is putting A-brands under pressure
Dutch food retail market 2013 [EUR bn]
25.8
Private label
5.6
7.4
Rise of private label
B
+17%
+17%
+38%
+39%
A
A-brand
-7%
-9%
-9%
Rise of challengers &
channel innovation
+102%
+107%
Traditional
retailer1)
Increasing pressure
Other2)
Challengers
& new channels
# % Delta of sales between 2013 and 2010
IMPLICATIONS
> Traditional food retailers are
under pressure:
– Rise of food retail challengers
puts turnover under pressure
– Rise of online decreases
margins (or turnover if not
captured by traditional
retailers)
> A-brands are under pressure:
– Rise of private label (partly via
discounters) decreases sales
– Rise of online decreases
margins
1) Excluding hard discounters Lidl & Aldi; 2) Including bakeries, butchers, night shops, markets, etc.
Source: GfK; Nielsen; Roland Berger analysis
140307 Private Label Congress 2014.pptx
16
D Forecast brand/private label development
The growth of private label is expected to stabilize at ~50% in the
Dutch market
Penetration of private label in various countries 20131) [%]
EMERGING
ACCELERATING
MATURING
SP
CH
WHY 50%
UK
50%
NL
FR
~5-10% additional
growth to come
GER
I
US
GR
BR
0%
CHN
Further increase:
> Consumers become more
price conscious, while quality
of PL increases
> Continuous pressure on
retailer's margins
Stabilization:
> The share of private label in
maturing countries seems to
stabilize ~50%
> Consumer loyalty at
supermarkets decreases with
a PL market share above
50%
Consolidating modern trade and maturing private label offer
1) Indicative, based on multiple sources
Source: EFMI; IRI 2013; Roland Berger analysis
140307 Private Label Congress 2014.pptx
17
E End-game
Close collaboration between traditional retailers and A-brand
producers could safeguard their positions against discounters
Proposed strategies for retailers and producers
Increase penetration through a
further differentiated offering
Private label
producers
Push private label
via direct channel
Continue
discount growth
strategy
Increase added value
for clients:
A-brand
producers
> Join forces in product innovation
> Combine consumer insights
> Align promotion strategies
> Increase consumer loyalty
Traditional retailer
(POTENTIAL) SPACE OF COLLABORATION
Source: Roland Berger analysis
Increase A-brand
penetration
Online retailer
Discounter and
other challengers
Other
140307 Private Label Congress 2014.pptx
18
E End-game
Collaboration should be adjusted to the retailer format: brand lovers
vs. brand users
Segmentation of food retailers
High
Contribution
margin
relevance for
producer
RETAILER ROLE
1
1
BRAND LOVER
> Increasing profitable growth
> Exploiting client potential
> Securing win-win
> Developing the KAM role
– Broaden agenda
– Build trust
– Multi-year commercial
roadmap
2
BRAND USER
> No category development
> Only transactional accounts/
volume drivers
> Selective "breaking" of
system
> Selective commercialization
of products
2
Low
Low
Desired development
Source: Roland Berger analysis
Willingness to
cooperate
High
140307 Private Label Congress 2014.pptx
19
E End-game
This collaboration should result in the preservation of substantial
market volume for traditional retailers and A-brand producers
Expected end-state of market shares [EUR bn in 2030; %]
Private label
A-brand
7.5-10 bn
(15-20%)
10-15 bn
(20-30%)
Traditional retailer
(POTENTIAL) SPACE OF COLLABORATION
Source: Roland Berger analysis
7.5-10 bn
(15-20%)
5-7.5 bn
(10-15%)
Online retailer
5-7.5 bn
(10-15%)
≤ 2.5 bn
(0-5%)
≤ 2.5 bn
(0-5%)
Discounter and
other challengers
Other
140307 Private Label Congress 2014.pptx
20

Download Report