An economic downturn is the ideal moment to launch private label products providing that they can be perceived to offering the same value at lower cost. For example in 2008 in the UK, health there was growth of the lowest range private label products of between 25 – 30%, often at the expense of branded products. Private label goods are a success when the packaging can be discarded easily or hidden, where the package is part of the product or cannot be discarded before use, for example with things like cosmetics, toothpaste etc then it is much more difficult to sell. Many people do not want guests at their home to know that they use private label products as it can carry a stigma. A private label product therefore needs to consider the question of packaging very carefully, especially in markets such as central and eastern Europe where shoppers are not as accustomed to them as they are in western Europe.
According to an article published on food and retail portal dlahandlu.pl, Jaroslaw Moc, head of private label branding at Real Polska, suggests that his company needs to work hard to convince clients that private label can offer good quality. He confirms the idea of the packaging, that for example with toilet paper or paper towels, then it is very easy to sell. The Real Quality private label product is the leader for toilet paper (see also our article today from Sainsbury?s). Furthermore their is brand loyalty which may explain why private label copy the packaging of branded products as closely as they can without getting themselves into trouble with the brand owners. Jaroslaw Moc uses coffee as an example, if we were to take Carrefour?s brand of coffee as an example, we can see that it is very similar to that of Nescafe.
Children?s products are another example of difficulties with private label, parents want to be seen to be doing their best for their offspring. Nonetheless Jaroslaw Moc mentions the difficulties that Real has had with animal food, something not experienced with other operators. We recently wrote of advances the Russian X5 has had with own label dog and cat food. Jaroslaw Moc believes that in the case of Real and Polish clients then the situation will become clearer in a few months time.
Whereas Real is seeing growth of thirty percent in its private label categories, it does not want to concentrate at the bottom end, the Tip brand, preferring the mid range Real Quality. One assumes that whereas Tip does have sales in quantity, the margins are tighter and long term the quality is weak.
Many beer manufacturers and their packaging suppliers such as Ball or Rexam are expecting a wind fall of sales and not only in Poland and Ukraine...
The number of privately owned small shops across Central and Eastern Europe has been falling for the past 15 years with thousands going out of business...
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