Let's talk business: CTM to be more precise

A private label covers several tasks for a retail chain. It is what differentiates you from competitors, it's an opportunity to build up a range of products and become unique. Often such goods are cheaper than their branded counterparts, but they are usually just as good in quality. Consequently, they allow customers to save money, and the retailer to increase customer loyalty and attract them to its shop.


The category is growing, and retailers' approach to working with private labels is evolving. Several main trends can be pointed out. First, private labels are no longer about the lowest price. According to Lenta, while private brands used to be primarily first-price products, now mid-priced products have taken the bulk of the market. The retailer also considers the development of private label in the high price segment potentially interesting, which is a relatively new niche for private label brands.


Magnit also sees great potential in developing mid- and high-price segments. "Whereas previously private label was perceived as low-priced and therefore not of the highest quality, now many people have come to understand and appreciate that buying own-brand products does not allow them to overpay for the brand," agrees Magnit. The company says that customers and manufacturers of the private label products themselves contributed to this to a large extent - private label products received similar or higher scores than branded products in blind tastings.

Secondly, retailers are expanding their private label range. This applies to the already explored categories as well as to new ones. Auchan now sells Camembert, Gorgonzola, Chevre, Stilton and Crotten under private label brands and plans to develop a range of sausage products in the mid-price segment, and meat and dairy products. In grocery, we will expand our private label lines of flour and confectionery products and offer culinary solutions - ready-made mixes and meals, as well as developing our healthy products range.


Magnit revised its core product lines, relaunched some brands, adjusted its pricing strategy and updated its product packaging. Last year, the retailer continued to optimise its private label portfolio and expand its range by scaling some brands and launching a portfolio of cross-category private label brands. Magnit shops now offer more than 1,000 private label products in such categories as milk and dairy products, flour, cereals, soft drinks, tea, coffee, canned meat and vegetables, fruit and vegetables, confectionery and household goods.


A number of categories remain relatively challenging for private label brands. Lenta counts baby food, pet food and cosmetics among them. "We are particularly careful in developing these categories, researching consumer preferences and interacting with manufacturers," the company says. - It is difficult to develop own brands in categories where there are already strong brands. We prefer to focus on segments where we can create the most value for the customer. Magnit sees the cosmetics category as a potential category for growth and also sees chances for success in a category that is not obvious for private labels, such as fruit and vegetables.

Thirdly, the customer's perception of private label is changing. Magnit emphasises that consumers are changing their perception of chain brands for the better - there is more information about the benefits of private label and consumers feel it. Lenta points out that customer requirements to quality of private label products increased significantly - pandemic made people think more about their health, so there is a growing demand for products without unnecessary ingredients.


Fourthly, the approach to naming private label brands is changing. Chains are moving away from brand association with the name of the retail chain (Global Village, Market Collection) and are introducing sub-brands. For example, Lenta launched private label sub-brands: "Lenta ECO" (food and non-food products with no unnecessary additives), "Lenta Green" (natural fresh vegetables grown under control at all stages in collaboration with seed producers, agronomists and farmers), "Lenta Premium" and "Lenta Kids". Magnit private labels are My Price, Magnit: Necessary Stuff (household goods), Magnit Freshness (vegetables, fruit, dairy and meat products), and Premiere of Taste.


Certain barriers remain for the booming growth of private label sales in Russia. For example, the high share of branded goods promotions. Lenta believes that brand addiction is turning into promotional addiction. There is no one-size-fits-all solution here - a different approach is needed depending on the category.


Source: marketmedia.ru