Private Labels in France

Karolina Galka
Alexy Celis
Dominique Tourrès
Loïc Sèbe
Béatrice de Ferrières
 Introduction
 A private label is a retailer own brand that can be sold
only in the retailer group stores (art. 62 – NRE act of may 15th 2006).
 Example : « Marque Repère », « Monoprix Gourmet », « Mieux
Vivre Bio», « Casino Délice », « Reflet de France », etc.
 1 out of 3 purchased product is a private label*
 A private label is 37% less expensive than a national
brand*
 Private labels keep on growing , near 10% in turnover
per month*
 Each retailer has its own label and extends its range of
private labels

 How private label modified Retail Industrial

Organization?
 What are the retailers strategies ?
 What is the near future ?
*Nielsen for PLMA
Agenda
Introduction
Structure of the market
History
Characteristics of the private labels market
Performances of the private labels market
Main strategies
Price strategy
Differentiation strategy
New trends and challenges
Conclusion
History (1/2)
1901 : Birth of Private label
Copy of National brand convenience goods.
(no quality, no design, no retailer image / strategy)
 1901 : Launch of the first private label by Casino
(grocery, charcuterie, cosmetic, sodas, etc …)
 1928 / 1931 : Launch of Monoprix / Prisunic on basic
products at low prices & limited quantity

1975-1985 : The revolution of free

products
Basic & low price product with high retailer recognition
against national brand
 1976 : Carrefour launched 50 generic products
History (2/2)
1985-1995 : Restoration of margins
Direct competition with national brand product
(same quality, attractive design)
 1985 : Carrefour developed design packaging with Carré
Noir agency
 1989 : ALDI First Hard Discount
 2000 : Leader Price, first private labels hard discounter
(Franprix)
1995-2003 : Explosion of brands &
increase of ranges
New generation product (sophistication, high quality,
differentiation)
 1996 : “Reflet de France” at Continent, “Escapage
Gourmande” at Carrefour
 1997 / 1999 : first Private labels for Auchan & Leclerc

2003 at today : Return of “first price”

Characteristics of the private
labels market
 Manufacturers can be classified in
three general categories:
 Large-scale manufacturers that produce
both their own brands and Private Label
products
 Medium and small manufacturers
specialized in particular product lines and
concentrated almost exclusively on
producing Private Labels (70 to 80% of the
private labels production)
 Retailers become producers and their
own suppliers  they become competitors
to the manufacturers : Vertical
Characteristics of the private
labels market
 Competitive environment
 Private Labels compete directly with:
 National brand products
 Hard Discount
 Entry barriers
 Retailers have their own distribution network and don’t
have to pay any fee to sell their products in the
supermarkets
 Retailers are free to decide their merchandising

 Consumer
 68% believe that private labels have nothing to envy
to the national brands (Nielsen 2008)
 A household spend per year 25% of his budget in
private label (50% for students) (Nielsen 2008)
Performances of private labels

X 2 in 15 years
Market share Market share

Nielsen for PLMA

Performances of private labels

+0,8
+1,5 +2,3
+2,6 points of
+1,2 evolutio
+2,8 n.
+1,9 Casino
+2,5 leader
+3,4 with
+1,5 37,9% of
+1,5 market
+4 share
+5,4 and +5,4
points
Performances of private labels
Turnover evolution in 2007 (%)

Private label monopolize the market growth

Niri, InfoScanCensus
 Strategies of the private labels
“Me too products”
 Equivalent quality but lower price  Second best purchase

Price strategy
 No marketing costs
 Every retailer order together  volume effect
 Price competitiveness & Higher profitability

Differentiation strategy
 Each retailer has its own specific private label

National brands industrials

Margin

Retailers Retailers / Private labels producers

Margin
Margin
Customers
 Strategies of the private labels
Operational result / Added Value
Private Labels Non Producing Firms 7%
Advertsing expenses / Turnover < 1% 5%
1% < Advertsing expenses / Turnover < 4% 9%
4% < Advertsing expenses / Turnover < 8% 18%
Advertsing expenses / Turnover >= 8% 12%
Less than 20% of the turnover Private Labels Producing Firms 10%
Advertsing expenses / Turnover < 1% 8%
1% < Advertsing expenses / Turnover < 4% 9%
4% < Advertsing expenses / Turnover < 8% 10%
Advertsing expenses / Turnover >= 8% 13%
Between 20% and 80% of the turnover Private Labels Producing Firms 12%
Advertsing expenses / Turnover < 1% 16%
1% < Advertsing expenses / Turnover < 4% 6%
4% < Advertsing expenses / Turnover < 8% 15%
Advertsing expenses / Turnover >= 8% 6%
Over 80% of the turnover Private Labels Producing Firms 14%
Source: CREDOC 2005

The more private labels suppliers produce, the more

profitable they are.
Ex: 85% of the Frozen vegetables market is Private
labels.
Current strategies
The traditional view always exists
but retailers develop a real
marketing policy:

To propose product differentiation

To encourage customer loyalty

To develop their brand image

Development of larger range of
products
Propose products for each consumer group
and answer the new trends in consumption
:
Down-market products  low price
Fair trade products
Organic food
Authentic products
Exotic products

 Offer quality and low-price products for

every market segment.
Promotion
 To encourage customer loyalty :
 Communication about quality and price
 Discount
 Fidelity card with special operation (discount, fidelity points)
New trends & challenges (1/2)
New trends
New market & increase of range,
example

Innovation,
Adaptation to the new ways of consumption :
 Healthy / Natural
 Sophisticated product (premium)
 Environmental packaging & product
 Sustainable development
Ease of use packaging,
New trends & challenges (2/2)
Challenges
Transfer private label as the favorite brand of
consumers (advertising since the 1st January
2007),
Growth despite price down of national brands
(LME law) and launch of low cost national
brand products
Growth despite financial crisis (boom of hard
discount)
Conclusion
Private labels are a major actor on the food
market and influence it on :
 Structure : With more than 30% of the market
share, Private labels are on direct competition
with their own suppliers / national brands
 Conducts : Focus now on innovation,
communication & every day low price, Private
labels are the price reference
 Performances : +75% of new products in 2
years, +10% of turnover per month, Private
labels pull and monopolize the growth of the
food market.

But with the financial crisis will they keep on this