What is the shape of the Private Label market?

- This is a market more complicated than it is generally thought. Above all, it embraces practically all the quality positions: from the cheapest products through standard, right up to premium products, of the highest quality parameters, endurance, aesthetics, etc. Private Label is always economy, but within the framework of a certain comparison category, although not always, it is a product in the group of the cheapest products. The last few years have been marked on this market by investments in higher “shelves” – a little due to the growing competitiveness of delicatessens, a little due to the general economic situation, but also a bit due to the realisation of wide politics, therefore, flexible towards the challenges of the product range of trade operators; a certain imitative mechanism also operated towards other previously developed markets (e.g. British, Benelux markets) and the transfer of strategies passed on by companies from there or Polish companies placing themselves “at the top” of the quality gradation of companies. Here, it needs to be added that our national specialty has become delicatessen chain stores, operating on various, also large areas; their common distinguishing mark is the great market success and “conquest” for the consumer by turning to quality and the elegance of the place of selling. In times of slowdown, it is them together with discounts stores (and discount offers of large-area chains), which are noting the highest resistance to recession in the economy.  Here, the good, quality-guaranteed own brand is celebrating triumphs. Similarly like standard own brands in discount stores and on cheap shelves of other chain formats.

Is this a developmental market?

- Oh, yes. In a natural way, the leader in the increase of the offer range and sales volume of own brands are discount stores (slowly coming to the number of 2000 objects) - today, this is approx. 50% of this market, but “supers”, as well as discount stores do not remain behind. What is interesting: small stores entering various “chaining” systems (franchise, shopping groups, others), due to the growing competitiveness of the market, are also taking decisions of introducing own brands into their assortment. A relevant player on this market are also wholesalers – both general and specialist, independent and chains, also acting in the Cash&Carry system are multiplying their own brands, in this way including independent stores in the market of these products. It can be said, that this market is developing and in the last few years, specifically three, it has doubled, reaching approx. 12% of the market in 2008. An interesting occurrence is that this market uses two motors - until recently from the economic situation, from which all and everything take advantage of, as well as - just recently – from the threat of recession, helping many consumers in making a purchase decision of saving. An additional factor, but more and more important for own brands, mainly wholesale, is HORECA - you can’t forget about that.

To what extent has the international economy crisis influenced the increase in popularity of Private Label?

- That is a difficult question and one that is not very “measurable”. I’ll put it this way: the growing trend of own brands has in many ways adapted to the crisis phenomena surprising business last autumn, on “grand” markets. Some consumers, simply disturbed by crisis reports and facts, have begun to take in the message “good and cheap” more attentively, accompanying own brands somewhat from definition. On the other hand, a number of companies in Poland – originating from the outside and the native – have noticed this occurrence and begun to expand their offer in this scope. However, there are no hike phenomena here; there is a trend, that has somewhat accelerated. At the moment I don’t have the statistics of this occurrence, and I’m merely stating the opinion of my environment, the media, conference discussions of experts - in my opinion in quality for now.

Are own brand products worse than brand name products?

- That’s a stereotype - actually a question put inaccurately. Here, there are worse products than their brand name equivalents, but there are also better - just like among producer brands. This is a very diverse field of supply and consumption, filled by a very complex sales strategy of trade and producer companies, participating in Private Label projects together. In Poland, very serious producers are bound by multi-assortment and long-term contracts for Private Label for C&C, supermarkets, delicatessens, and last but not least - discount stores. Most often they carry out the production of their own goods and average between chance for synergy and the risk of shelf cannibalisation of their products in collision with “their own” own brand. What’s more, these are companies producing only own brands. Messages of business decisions and various forms of cooperation (and the risks accompanying them) have been known for years, and function according to algorithms known around the world.

How is the quality of own brand products changing?

- It’s changing for the better. Not only through adding to the offer of products from the higher quality positions, which we already talked about, but also through the very strong competition on this market. The quite tight supervision of national control over the own brand market, which started up in the segment of cheapest products ten years ago, is also a consequence.  As a result, the share of higher and high quality products has increased, the quality of cheap and the cheapest products has improved – it can be seen in consumer research and annual reports of the Trade Inspection.

What is the assortment structure of Private Label products like?

- It almost exactly mirrors the structure of category of “producer” products. Food products dominate, but also among clothing and shoe products, RTV, cosmetics, household chemistry, paper and derivatives, own brands take a significant position. It is characteristic, that among cleaning agents and paper in some discounts and supermarkets, the sales of own brands is beginning to dominate (exceeds 50%). The explanation of this occurrence is quite simple – reaching for own brands is described with known arguments of sales strategy and financial calculation of the producer and distributor. It is used in each product category – and only the development of the market (consumer) to the demand for this type of product expands the strategy of introducing own brands of a given category for selling. This is a simplification, but gives an accurate basis for particularising in specific cases.

Will own brands threaten producer brands?

- Just like any product threatens its competitor. It reminds a little of a race between a “missile and armour” - the new strategy of offering products of a well-known brand usually addresses the quality and exceptional properties, prestige, etc. marketing specialists know what to do, but... distribution sees a chance in this and refers to this more in addressing the purchaser with the price. And vice versa, the brand begins from addressing with price, therefore, own brands refer to quality, availability - additionally cheaper and specifically more interesting.  Neither the first nor the second system of creating offers will disappear, although for now, own brands are fighting for their place on the market, and its strategies are described as especially aggressive. However, I do not agree with this opinion – there is not existence on the market without this x factor contained in aggressive behaviour, in which producers are also not saint. I think like this, because own brands engage a minimum of 25% lower costs of coming into being and offering a product (the profit is more or less equally distributed between the distributor and the contractor). And this is a problem for “brand” competition. However, on the other hand, specialisation, technological know-how, marketing character, knowledge of offer synergies, etc. causes that there is no possibility of renunciation and replacing brand producers in any market segment, or category of products. In effect, everyone profits in this competition, and consumers benefit the most – and that’s what it’s all about.

What does the Polish Private label market look like in comparison to other countries?

- We are at the beginning of the road. Leading countries, that is Great Britain, Switzerland, Germany, have approx. 40% (on average) of Private Label in the turnover of modern trade, and these are markets having over 80% of shares of the modern retail market. Here, as I have mentioned, Private Label constituted approx. 12% in 2008, but this share is increasing quickly. I think that the limit of investment reason in the scope of these projects and certain balance within the offer of the entire trade is approx. 25-30%, to achieve in the course of the next five years. Estimates from a few years ago talked about 25% in 2011, with a forecast of the decrease in dynamics for the following years - taking into account the general dynamics of the consumption market, the indicated share can be considered accurate, but... time will tell.
The market is developing, national and foreign players see reason in investing in trade in Poland, so Private Label, as a good drive for the increase in income (relatively good margins, with relatively low costs and fast rotation) finds strategically beneficial conditions for development – and companies know this, while consumers have no reason not to buy “these” products. Generally, the good condition of Polish producers in terms of quality, the fast increase in the trade sector, development of certification and auditing systems, create good grounds for progress in this scope. In my opinion the future is promising.

Thank you for interview.
Maja Święcka