Andrew Quinn

Written / SABINE GEISSLER

Ah! Italia! Crisis, recession, negative figures: Italy is often indicated as one of the most uncertain European countries and as a risk for the Eurozone.

In Italy, the sales volume in the traditional retailers show a negative trend, sales of non-food products are going down, per sales-receipt gets lower, consumers are turning to high convenience distribution channels (discounts) and sales due to promotions are increasing (25,7%, with a peak of 27,3% in October 2012 and of 34,5% in the hypermarkets). In search of convenience, consumers alter their buying behavior, shopping less in hyper and supermarket formats, shifting to discounters and superstores.

In the midst of all this, we can fortunately point to an amazing case of excellence and growth: In 2012, Conad, a cooperative and one of Italy’s leading retailers with 3.052 stores (40 E.Leclerc Conad, 180 Conad Superstore, 918 Conad, 862 Conad City, 790 Margherita, 192 Todis and 70 other channels) invested 400 million Euro in the creation of 106 new stores, and has created 4.400 new jobs.

Today, Conad is present in 108 out of the 110 Italian provinces and will close the financial year 2012 with a turnover growth of 8%. More precisely, according to Gnlc Nielsen, the foreseen 2013 turnover is of €10.970 billion, €809 million more than in 2012 (+7,96%).

Gnlc Nielsen also reports that Conad’s growth comes from the development of its sales network and market share gains of 17,6% in the supermarket sector (increase of 4,1% when compared to 2011) and 14,1% in neighborhood stores (+6,8% when compared to 2011); the market share in the hypermarket segment is of 4,6%, with a total market share (average of all sales channels) of 11,1%, which corresponds to a growth of 0,8% when compared to 2011.

This results owe a great deal of thanks to good performance of the Conad private labels, where sales have grown when compared to 2011 with a value of €2.089 billion and a share of 25,1% which is superior to the average private label sales share of the Italian market (18,1%). This performance is possible thanks to the product quality of the Conad private label ranges, which is similar to A-brands, but with a cost-saving of about 25-30% (source: Symphony Iri)

According to the Conad’s general director, Mr Francesco Pugliese, “we grew in all channels primarily thanks to private label products and fresh food. In 2012, we have achieved much more than forecasted: 400 million Euro of investments and 4.400 new jobs. Conad is economically solid and has targets of further growth, because the absolute leadership of the retail market is a reachable target”.

Conad started a multi-tier private label program years ago, with the creation of specializations and services in addition to the traditional supermarket product range.
Conad operates 9 opticians corners and 55 para-pharmacies, where the OTC pharmaceuticals, para-pharmaceuticals and products for personal care are sold with savings of around 21%, sometimes as much as 40% when compared the traditional opticians and pharmacies.

Conad has focused on smaller store surfaces located in the cities, whereas other retailers invested more in big surfaces located out of the towns. This policy of smaller stores has been successful and Conad operates three shop formats “Conad City”, “Conad Margherita” and “Sapori & Dintorni”, the latter one, shown here, specializing in regional Italian food specialties and gourmet food.

A CLEARLY STRUCTURED PL STRATEGY >>

Conad’s multi-tier private label range is clearly structured and carries today the following brands:

CONAD >>

Over 1000 products distributed in different categories, for daily use and with a sharp quality-price relationship. The Conad-branded food products exclude the use of GMO and utilize a traceability system from the raw material origin to the ready product.

CONAD IL BIOLOGICO >>

The organic range with the brand Conad il Biologico carries organic food products for everyday consumption. Some products are also certified Fairtrade, such as bananas, some chocolate and coffee.

CONAD KIDS >>

Food products specifically for children, which offer balanced nutrition for with regard to controlled calorie input and reduced salt and fat contents. Conad Kids uses a mascot, comic-Lion design on all packages and the range includes breakfast items, cookies and juices.

CONAD PERCORSO QUALITÀ >>

This private label brand identifies fresh meat, fish, seafood, fruits and vegetables under a wholly controlled production chain to offer best quality fresh food.

The quality controls and analysis are carried out from the source, during transport and to the shelf and and allows Conad to get the fresh food in a minimum time to the consumer to assure quality, food safety, healthiness and freshness.

AC ALIMENTUM CONAD >>

For consumers with specific nutritional exigencies and positioned as a “daily help for the wellbeing of the whole family”, it is divided further into: Cuore includes food which can help to control the cholesterol level in the blood Regolarità includes food which aids the balance of the intestine bacterial flora Difesa includes food which helps strengthen the natural defense of the immune system Alta Digeribilità includes food for lactose intolerant people.

Conad is also working on a Linea Senza Glutine with gluten-free food products.

CONAD PIACERSI >>

Is range of foods with low fat, low calories, no sugar and rich in fiber.

A PIONEER WITH THE SAPORI & DINTORNI PREMIUM PRIVATE LABEL RANGE >>

Sapori & Dintorni:
The Sapori&Dintorni brand was introduced by Conad in 2001 with about 210 food items, which then represented about 10% of the Conad assortment. It is dedicated to local Italian gourmet specialities and it promotes the food culture of single Italian regions. It was the first private label specialty food brand to be exported, where Conad worked as a selector of a qualified Italian food range to be sold in retailers in France (E.Leclerc), Switzerland (Coop Suisse) and Belgium (Colruyt).

Today, all major retailers in Europe carry a gourmet food premium range, as shoppers in developed markets look for “value” and retailers seek to build loyalty with specific consumer groups. These shoppers are educated, critical, informed and mostly in medium-high social positions, with a good income. Retailers are obliged to offer real premium food ranges to keep them away from specialty stores, organic stores and local fresh food marketplaces.

The development of premium ranges has lots of benefits for all players: it allows small and medium sized producers of local traditional quality food to offer themselves as partners of the retailers; it allows the retailers to respond to an increasing demand for transparency of the sourcing, to quality food obtained from healthy raw materials, made with a real, human know-how.

A private label range becomes a Retail Brand

In 2010, Conad went one step further and opened the first two stores under the Retail Brand “Sapori&Dintorni”. These first stores of about 400 square meters opened in Florence with an assortment dedicated to the Sapori & Dintorni branded food with spaces for tasting, as well as museum ticket office and information of the cultural life and activities of Florence.
Performance of these two stores is excellent with profitability of more than €20 thousand per square meter, one of the best figures in Italian retail. It’s a high traffic location due to the services offered and fresh food which accounts for 65% of the turnover.

As a result of this success, in December 2012, Conad announced an agreement with Grandi Stazioni Spa for the opening of four innovative Sapori & Dintorni stores in four train stations. By June 2013, they will open in the stations of Milano Centrale, Firenze Santa Maria Novella, Roma Termini and Napoli Centrale, with a surface between 800 and 1.000 square meters each, creating many new jobs.

These are bigger store dimensions when compared to the first 2 Sapori & Dintorni Stores, where Conad can display better a wide assortment of premium food: more than four thousand items, among those all the food items with the Sapori&Dintorni brand, further to 500 local excellence products and a wide choice of locally sourced fresh food.

“It is an important occasion to satisfy concretely the demand for quality products also in places where there are moving many people like train stations and to contribute distinctively to the re-qualification of urban spaces which need to live also beyond the function they have been built for” says Conad general director Mr Francesco Pugliese.

Pretty amazing what a Private Label can do.

Bocon srl, producer of frozen products such as Risotto, Cooked Vegatables, Regional Specialties,

French retailers are looking far and wide for new Private Label products to boost their sales in their conventional supermarkets with the rapid growth of their “drive-through” service.

Differentiate their own branded products and solidify their relationships with the consumers.

The pick-up site facilities (you place an order online and you pick-up your order at the location of your choice) are growing exponentially and now represent an expected total sales of 15 billion € in 2012. It has caused Carrefour, Auchan, Système-U and Intermarché among other retailers to rethink their product offering in their ‘conventional’ stores.

Category Managers are looking for additional Private Label Specialty premium products to stimulate impulse buying, which is not a behavior shoppers have while buying online.
Nielsen estimates that already 10% of the French consumers are now using the “click and collect” system for their shopping. 900,000 online shoppers are repeat customers and spend an average of 70€ per order (twice the size of an average basket in a supermarket).

Customers who made “Drive-Through” service as their main shopping behavior generate already over 30% of the Pick-up facilities revenue.

This item courtesy of Wabel and Antoine Bonnel.

www.wabel.com.

Written / MATTHIAS QUECK, RESEARCH DIRECTOR, PLANET RETAIL

German hard discounter Aldi is reportedly planning to add manufacturer brands to its drugstore ranges. Lebensmittel Zeitung has learned that Aldi Nord and Aldi Süd are negotiating with major manufacturers such as Beiersdorf (Nivea), L’Oréal, Henkel, Procter & Gamble, Colgate-Palmolive and Nestlé. The latter, however, has denied any talks while the other companies have made no comment on the report.

More brands mean that Aldi is at greater risk of price attacks from rivals. The discounter has recently lowered the prices for the Heinz baby food range in the UK.

To date, Aldi’s drugstore ranges have consisted exclusively of private labels, despite the presence of several national brands in other categories. Aldi wants to revive sales in the category by attracting more young families and by poaching customers from drugstores and rival discounters. In order to market the move, Aldi is even considering highlighting branded products in its advertising for the first time, including in TV spots.

The move should not come as a big surprise, following the introduction of selected leading brands by the discounter in various countries. When it comes to the drugstore categories, Aldi Süd has been offering a relatively broad range of branded goods in Hungary for some time, including brands from Procter & Gamble, Johnson & Johnson and Henkel. It is part of Aldi’s international efforts to become a one-stop shopping destination.

DIRECT CHOICE: PRIVATE VERSUS BRANDED >>

For Aldi Süd in Germany, the news about the introduction of extra brands has thus far remained a storm in a tea cup or, should we say, a Nutella jar. Nutella, Ferrero’s hazelnut spread, has been the only addition up until now since the news broke in spring, but it is nonetheless noteworthy.

Unlike other Ferrero products – and other branded products Aldi Süd (but not Nord) has been selling for years or even decades – what is new is that the brand is being offered alongside Aldi’s own brand version, and not instead of it. The shopper now has a choice between Aldi’s Nutoka and Nutella, while other brands were previously only offered when the retailer was unable to find a qualitatively appropriate private version.

IMPLICATIONS >>

• The new thing about Aldi adding more brands is that the hard discounter will very likely offer them in addition to its private labels, not instead. This means that private label suppliers will not lose the full product turnover, but suffer massive volume declines.
• Aldi’s plans to add brands to its health & beauty care ranges will be glad tidings for the brand manufacturers concerned, due to the promising volumes in Germany and abroad. But only the strongest brands will thus be strengthened, with their best selling products – ideally in different pack sizes to avoid direct comparison.
• Do not expect Aldi to initially pull down the price level. However, reactions from competitors such as drugstore retailer dm may run the risk of initiating a downward price spiral.

In its food departments, Aldi has been able to cultivate customers’ tastes over the years by accelerating the innovation cycle. However, this is in stark contrast to its drugstore ranges. There, besides one or the other weekly ‘special buys’, the hard discounter has been broadly unimaginative.

This does not mean that Aldi has not been active at all. But in contrast to its everyday products, it has only been the slow-moving HBC ranges where Aldi has attempted to be innovative, such as deco cosmetics and anti-wrinkle crèmes. Oh yes, and not to forget that Aldi was among the first to add a sixth blade to its men’s razors – perhaps because it was easy to imagine what would come next after the brand industry’s introduction of the five-blade version.

NO GREAT EFFORTS >>

But surprisingly, Aldi has not even noticeably tried to make its everyday HBC products more attractive. In the light of the continuous efforts its drugstore competitors, namely dm, have been ploughing into constant redevelopments, improvements, redesigns and relaunches of their basic ranges, Aldi’s shower gels and shampoos are not products one would want to treat oneself to in the bathroom just after getting up in the morning.

While it has always been the ‘rationally minded’ customer that Aldi has served well, it has never really understood how to appeal to the increasingly irrational or, perhaps emotional, demands of the drugstore shopper. Instead, it has dismissed the HBC category as ‘non-core’ and, when in doubt, played the price card, resulting in incredibly low price levels for drugstore goods. The huge price gap between its private labels and leading brands, originally thought to demonstrate the retailer’s strength, has paradoxically become indicative of a lack of credibility. Again, what is strange is that Aldi has not even tried to be more innovative in its basic drugstore ranges, and as a consequence will be leaving the field to a handful of leading brands and their advertising power.

But not even the price game has really been won. In the food categories, Aldi has managed to impress upon its German competitors not to try to undercut the discount leader in price. In the HBC arena, however, drugstore market leader dm is happy to lock horns with the Aldi simply by dint of going even lower. The only good thing is that promotional prices – which could undermine Aldi’s price leadership – will not represent a massive threat as dm is the one other major player in Germany besides Aldi that pursues a strict EDLP (everyday low price) philosophy.

That said, the promotional danger still looms from other competitors. This was recently seen in Austria, just after Aldi Süd’s listing of Coca-Cola. Hofer felt forced to cut the retail prices for the soft drink permanently by a third as it was assailed by promotional campaigns from its competitors. Similarly, Aldi in the UK has just lowered the prices on its relatively new Heinz baby food range due to competitive pressure. “Private labels mean independence”, Aldi has always said, and now it is feeling the pain caused by non-observance of this very principle.

Rewe has cut prices of hundreds of products to match them against the new benchmark, dm.

CAUSE FOR CELEBRATION? >>

The listing of brand leaders will surely give sales a boost, and may cause rejoicing for manufacturers in the light of the massive additional volumes they can expect, in Germany and abroad. But it will only be the strong that will be strengthened further. While it can be seen as surrender – as it represents a deviation away from Aldi’s traditional private label philosophy – the move deprives other discounters of one of their primary USPs: the ‘Aldi plus leading brands’ concept.

The strategy also comes at a time when the German drugstore sector is undergoing dynamic changes. However, this seems to be pure coincidence. After the recent spectacular failure of Schlecker – once the leading drugstore retailer with more than 10,000 stores across the country – all grocers are hungry for a larger share of the market.

In order to win over former Schlecker customers, Aldi’s plans – and remember that the launch of drugstore brands is still at the planning stage – may come too late as all German Schlecker stores have already been closed down. Meanwhile, grocery market leaders Edeka and Rewe Group are investing in improved drugstore departments in their supermarkets, and are busy extending their own private label lines.

At the same time, price pressure has significantly intensified. During Schlecker’s existence, its relatively non-aggressive pricing was regarded as an easy-to-match benchmark by the supermarket operators. Now that it has vanished from the map, the far more forceful new leader dm has emerged to set a new standard. But matching prices with dm can easily translate into a permanent reduction of up to 40% for some products. Consequently, Edeka and Rewe Group have partly lowered prices of more than 1,000 products. This does not only include brands. Rewe has recently adjusted product prices of its eponymous standard private label to match the economy levels of dm and Aldi.

So, should dm pick up the gauntlet thrown down by Aldi’s decision to list leading drugstore brands, a price war fought with the means of EDLP would only perpetuate the destruction of profit margins.