Private labels as an opportunity to implement innovation and develop export
Friday, 10 June, 2016
Food From Poland 25/2016
We are definitely experiencing a kind of transformation today – from “Private Labels” to “Own Brands”. Modern private labels compete with national brands not only with their price (although it still remains an important determinant for success) but through the creation of a unique offer implemented on many levels: from the specific nature of the product itself and the assortment, to entering new categories (which are, quite frequently, new on the market, not just in a given store chain), implementation of innovations on the level of packaging technologies and packaging design, to conducting strategic, refined and consumer-engaging marketing.
Such an approach is often a “to be or not to be” situation for a national brand being pushed out of the market by increasingly more effective and professional private labels. On the other hand, strong private labels, with stable, often very extensive distribution systems, are a perfect opportunity for suppliers producing at the request of store chains. By offering nationwide distribution, and in the case of global brands, also by opening export markets to many of their suppliers, chains provide excellent conditions for growth.
Private labels in Poland are also a stable and relatively inexpensive channel for the implementation of innovations, especially for smaller producers. Owners of private labels, trying to reach a wealthier and more demanding consumer, look for innovative and interesting products, eagerly utilizing ready solutions in this regard, offered by suppliers, or cooperating with them to elaborate unique solutions or optimize production costs.
Trade chains are also highly interested in niche segments (“free from food”, functional food/superfoods, bio/organic, ready to eat food, etc.) creating an opportunity to enter mass distribution for smaller and local producers. Thanks to the scale of activity, they also promote new product categories among consumers in Poland, influencing their nutrition habits, and the beneficiaries of this “educational” activity are both sides: both private labels and suppliers with their own brands.
Having spent 12 years observing the direction of development of private labels in Poland, growing appetites of trade chains for the creation of strong brands, and the resulting supplier activities, I believe that the development of private labels has one more positive aspect which may be hard to notice in the everyday struggle for survival on the market. An expansion of private labels towards higher quality (of both product and consumer communication) causes Polish producers to wake up from a lethargy and learn to act flexibly and effectively. After this, it is just a short step to creating strong Polish brands, not just successful in the competition against private labels but showing a potential to appear on international markets.