Transcript Food USA - H E Butt Texas - Private Label Manufacturers

Presentation to
CommSec
10 current trends in Private Label in Australia
Paul O’Brien
Private Label Manufacturers Association
Australia and New Zealand
http://www.privatelabelmanufacturers.com.au
12 oct 2007
PLMA Australia / New Zealand
Trend 1 – Market Leader Equivalent
•
Private Labels in Australia are no longer just generic in nature.
•
Today Private Label offerings by our major retailers represent
products of market leader quality.
•
Private Labels now in highly appealing state of the art packaging which
in many instances is as good as or superior to the market leader.
PLMA Australia / New Zealand
Trend 2 – Heading for a Third of Sales
•
Private Labels are developing fast . We were slow to adopt
- this has now changed - we are now approaching US Private Label
share levels of 20% (5 years ago it was a little over 10%).
•
Private Label UK sales are around 40% share
•
A share level of around 30% is attainable within a 5 year time frame.
PLMA Australia / New Zealand
size & growth of private label
Australia
$(millions)
400.0
360.0
$(millions)
320.0
280.0
240.0
200.0
$320M per month
$4 Billion per year
160.0
120.0
80.0
40.0
0.0
November 2005
May 2006
November 2006
May 2007
August 2005
February 2006
August 2006
February 2007
Total Private Label
PLMA Australia / New Zealand
Data Source – AZTEC grocery review
size & growth of private label ($4B
Aust)
Australia (Excluding Aldi)
$(000) Growth % YA
7.6
8.0
$(000) Growth % YA
7.2
6.4
5.8
5.6
4.9
5.1
4.8
4.0
3.2
2.4
1.6
0.8
0.0
MAT To 22/07/07
Total Defined Grocery
MAT To 23/07/06
Total Private Label
Australia (Excluding Aldi)
Units(000) Growth % YA
Private Label growth
outperforming Total
Defined Grocery in
Australia for value
Units(000) Growth % YA
2.0
1.8
1.6
1.4
1.2
1.2
1.0
0.8
0.8
0.6
0.4
0.4
0.3
0.2
0.0
MAT To 22/07/07
Total Defined Grocery
MAT To 23/07/06
Total Private Label
PLMA Australia / New Zealand
Data Source – AZTEC grocery review
Value $000s Share of Total Till Receipt
private label share in Australia by
retailer
Value $000s Share of Total Till Receipt
Total Private Label
80.0
71.1
70.0
60.0
50.0
40.0
30.0
20.0
16.9
15.9
14.3
8.5
10.0
12.1
8.4
0.0
Woolw orths
National Panel - Grocery
MAT To 05/08/07
Metcash
Coles Group
Aldi
Franklins
Other Grocery
PLMA
Australia / New Zealand
Quarter To
05/08/07
Data Source – AZTEC In Home Panel
Trend 3 – Enhanced Expertise
•
Private Labels have increased competition, innovation and marketing
expertise, not only in terms of developing Private Labels, but also in
terms of combating them.
•
It is worth reflecting that Aldi is an international Private Label retailer
and the arrival of Aldi has increased retail competition in Australia which
is extremely healthy.
PLMA Australia / New Zealand
Trend 4 - Innovation
•
There is a misconception that Private Label
practitioners are simply copiers - this is not true
•
Private Labels have pioneered many product innovations microwavable pre packaged steamed vegetables is just one example.
PLMA Australia / New Zealand
ASDA Baby
•
Clear Breathe was clever enough
but the pack is divine
•
It is a packaging idea that you would
expect J & J to come up with
PLMA Australia / New Zealand
Steamable Vegies
•
Conceived as a PL
•
Taps into microwaving
•
Flanked competition on day 1!
•
Created in partnership with
Packaging supplier
PLMA Australia / New Zealand
Trend 5 – Better Marketing & Product
Development
•
Private Labels have lifted product standards in several dimensions Brand marketing and product development teams are conscious of the need to
continually refresh and innovate to prevent inroads by Private Labels.
•
Private Label suppliers are aware that they need to add value to their offerings
to obtain ranging by retailers and to continually refresh and innovate to retain..
•
An absence of Private Label equates to a lessening of competition which slows
innovation and product development. Satisfying consumer needs is the game
and Private Labels play a vital role along with brands.
PLMA Australia / New Zealand
Loblaws Canada – The Beginning
•
President’s Choice
•
Landmark marketing at
its best
•
They lead the way in
North America in
retailing AND marketing
•
20% more chips than
Chips-A-Hoy
PLMA Australia / New Zealand
PLMA Australia / New Zealand
PLMA Australia / New Zealand
UK Non Food – Sainsbury’s
•
A superb example of sub
brand taking on the market
leader
PLMA Australia / New Zealand
UK Ready Meal – Sainsbury’s
•
Another example of
sophisticated ethnic
speciality variants for
the general market
PLMA Australia / New Zealand
Trend 6 – Brands Remain Dominant
•
Brands will always be dominant. In the UK, Private Labels have plateaued at
around 40%. In the US Private Labels sit around 20%.
•
A likely medium for this country seems to be around 30%. There is no data to
support Private Label market dominance - Private Labels will and do dominate
some categories but brands are and will remain pre-eminent.
•
It is interesting to reflect that Private Labels need Brands to aspire to as
consumer benchmarks and Brands need Private Labels as consumer
benchmarks that they can exceed in the battle to satisfy consumer needs.
PLMA Australia / New Zealand
Trend 7 – Brand Rationalisation
•
Brand rationalisation is a natural phenomenon that occurs in all markets as
retailers seek to improve profitability via increased efficiencies and to
accommodate ever increasing innovative offerings within finite shelf space.
•
Private Labels are now a major strategic initiative by Australian retailers - driven
by improved margins, exclusive offerings that enhance “destination shopping”
and the need for retailers to differentiate themselves from their competition.
•
The expansion of Private Label adds to Brand rationalisation but it is not
the cause of it.
PLMA Australia / New Zealand
Trend 8 – Enhanced Retailer Skills
•
Private Labels enhance retailer skills. The major retailers now have formidable
Private Label teams consisting of market analysts, quality assurance, food
technology experts et al. As a consequence the retailer of today bears no
resemblance to the trader of yesterday.
•
By acquiring these skills retailers help drive a culture of innovation and product
quality - this too is healthy.
•
All major retailers insist on strict quality audits of manufacturers. Added
to internal and legislated audits this leads to an ever increasing standard
of quality control and good manufacturing practice.
PLMA Australia / New Zealand
Trend 9 – Export Market Opportunities
•
Private Labels provide an opportunity to develop export markets. There are many
examples of Australian manufacturing using “country of origin” positioning to enter
Private Label markets in North America and Europe.
•
In the process they develop international skills and resources which enable them to
compete more effectively in the Australian marketplace.
PLMA Australia / New Zealand
Trend 10 – Partnerships Key
•
The future of Private Label in Australia is dependant on manufacturers
continuing to bring product innovation and the highest quality standards
to the table and on retailers focussing on satisfying consumer needs with products
that meet and exceed their expectations.
•
As a consequence robust manufacturer / retailer partnerships will become ever
more important in the Australian market and will eventually develop to the level that
is already evident in Europe and North America.
PLMA Australia / New Zealand
The Price / Profit Equation
The Retailer
• Rule # 1 – Private Labels must not devalue the category
• Rule #2 – margin must exceed category average
The Manufacturer
• Private Labels are nett nett – no terms – no line fees – no co-op – no
advertising- no field force cost – tight SKU count – security?
The Price Formula
• Prices address retail competition. For premier tiers price is around 10 –
15% off brands. For lower tiers price addresses value perception.
PLMA Australia / New Zealand
Major Issues
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•
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•
•
•
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Retailer focus is still on price
Private Label expansion takes time, commitment, dedication, advertising and
promotion to succeed – are retailers able to go the distance?
The supply pond in Australia is small and shrinking – manufacturers need to expand
their Private Label endeavours
Duplicated auditing / testing / freight costs / supply chain requirements add a cost
burden to manufacturers (shelf ready packaging?)
Private Labels can make retailer advertising more meaningful – it’s a fact that’s
overlooked
Private Label penetration is high at 93% but ‘cash ring’ is low at $2.17 vs. $5+ in the
UK- The task is to get consumers to trade up.
Need for manufacturers to ensure IP is protected
PLMA Australia / New Zealand