Private Brands – Is at least one of the five products you bought today a private label?

Almost seventy percent of consumers in the European Union believe that the private labels of certain retailers are of equal quality to branded products from renowned manufacturers. Although there is no fresh research on consumer attitudes towards private labels in Croatia, there is no reason to doubt that our consumers think excessively differently. Sometimes it is enough to just look at Ženski recenziraj on Facebook, where thousands of users rate various products and services, to conclude that some of the best-rated products, those that literally disappear from the shelves when praised, are indeed private label products.

Private labels are, which is not at all unimportant, more affordable, so it is no wonder that retailers often cite this price as the main lure for purchasing private label products.

However, while for some the price is the lure, for others the premium segment of private labels is equally important and sought after, and the offer of private labels expands according to consumer habits. Today, there are private label products in the healthy and active lifestyle segment, ready frozen and canned meals, snacks, as well as household maintenance products and cosmetics, even ethnic private labels like Italian or Chinese products. And all of them find their way to consumers.

Everyone wins

Private labels create a win-win situation for all stakeholders in the economy. The first win is for manufacturers who do not have their own market but work for others and thus fulfill their capacities. The retailer, in turn, gets a product under its name, in whose production it does not have to invest itself, while the consumer remains loyal to the retailer! This loyalty is precisely what is valued. Hendal conducted a survey among consumers in May about brand loyalty, and the results showed that 57 percent of citizens state that during a crisis they buy brands they can trust more often.

On an annual basis, private labels in Europe, according to data from the Statista portal, increased by 5.7 percent by September 2020, with the highest growth seen in private labels from the food and beverage segment – averaging 6.1 percent. According to some consultants, the trend of increasing the share of private labels in total sales is also rising. Every fifth product in the domestic shopping basket is, according to claims from some of them, a private label.

Kaufland, for example, states that it has more than 4,400 items in its own private label assortment. They stand out primarily for their quality, for which they carry various certifications such as Fairtrade, FSC, Fish of Croatia, Eggs from Croatian farms, and so on. – The emphasis on Kaufland’s private labels is certainly also on price; we ensure that our private label products are accessible to everyone – said Daniel Šturm, a member of Kaufland’s Management Board for Procurement.

– Through our private labels, developed in Croatia and intended for the Croatian market, we promote domestic, local production. We collaborate with verified and certified suppliers, and Croatian manufacturers are an important segment of Kaufland’s business, which we have developed since our beginnings in Croatia. That is why we are particularly proud of our product lines K-Classic and K-Favourites Naše mi najbolje paše, which is the pinnacle of the already well-established cooperation between Kaufland and Croatian manufacturers. All products included in the project are special in that they are made by domestic producers according to traditional recipes, are of Croatian origin, and their main ingredient, or raw material, is from the Republic of Croatia. In addition, the quality of these products has been confirmed by the Public Health Institute ‘Dr. Andrija Štampar’ with its controlled quality mark – noted Šturm.

He emphasizes that the number of private labels in Kaufland’s total assortment in Croatia increases every year, and the share in sales grows year by year. Therefore, this retailer will continue to develop, concludes Šturm, new items of its own private labels to meet the demand and needs of consumers.

As Lidl responded to us, which, like Kaufland, is part of the Schwarz group, the share of products under Lidl’s private labels in their stores predominates and amounts to about 80 percent. Lidl’s customers have exceptionally well accepted Lidl’s private label products, the company stated, which is confirmed by research.

– Tastes of the Homeland is one of our most recognizable private labels. In 2013, when the brand was launched, about 60 products from all corners of Beautiful Croatia were included in the offer. Since then, the brand has achieved great success with our customers, and the line is supplemented with new products from Croatia year by year, so today it has more than 100 products, of which more than 90 are in the permanent assortment. In 2016, this brand was enhanced by the project ‘Taste Your Homeland’ in collaboration with the Croatian Chamber of Economy (HGK). At that time, Lidl and HGK were the first on the market to invite domestic fruit and vegetable producers to apply for the competition, and the best suppliers were included in Lidl Croatia’s assortment. By strengthening consumer demand for products according to traditional recipes and from other segments, the project was further expanded within the same Lidl promotional weeks, where products from smaller regional, local producers and family farms can be found. Currently, we have a base of more than 60 producers and family farms and more than 200 products, including the assortment of fruits and vegetables – Lidl responded, stating that their goal is to continue to act continuously in the direction of increasing that number.

Path to export

Suppliers who produce the Tastes of the Homeland assortment for Lidl Croatia also added that they market their products through Lidl’s store network to more than 20 markets outside Croatia. They also note that all Lidl’s fruit and vegetable suppliers hold the Global G.A.P. certificate, one of the most widespread global standards for the primary production of fresh fruits and vegetables.

– Producers who hold the Global G.A.P. standard commit to applying good agricultural practices, a pesticide control program, a quality management system, and HACCP principles when carrying out all activities on the agricultural farm. In addition, Lidl Croatia has helped its domestic suppliers and producers obtain International Featured Standards (IFS) Food, an internationally recognized and one of the most respected standards for controlling production processes, which applies exclusively to private labels – Lidl stated.

The pandemic accelerated

Martin Evačić, director of the National Trading Chain – NTL, responded that the share of private labels in the assortment of that chain is 15 percent, and when asked for specific numbers, he replied that it is a total of 600 different private label items. NTL’s best-selling products are represented alongside brands, Evačić emphasized, and in the private label variant.

– Our specificity is that we always demand the same quality from manufacturers as with their own brands. Mostly, these are manufacturers from Croatia, although we have some products from practically all over the world. Every year, consumers increasingly choose private labels for two reasons: they are more affordable, and the quality does not differ from branded products. The pandemic has somewhat accelerated the trend of increasing sales of private labels. Sales account for more than 20 percent of volume, which is a higher percentage than their representation in the assortment – Evačić explained.

K Plus is the most recognized private label of the Konzum retail chain, and in the total offer of its assortment, there are more than 2,000 private label items. In addition to the usual products from the basic basket, customers of this retail chain can find premium private labels for gourmets, private labels for those who want to live healthily, and labels for people with special dietary regimes, such as ‘free from’ labeled products. At one time, more than 200 manufacturers produced private labels for Konzum. Spar has been investing in its own private labels for years, from food, household products, food for those who watch their diet to body care products. Spar also has private labels for office and school products in its assortment.

Foreign, yet domestic

Significant investments are made in private labels at Studenac, and year by year the offer is getting better, so it will be difficult for an inexperienced palate to guess that cheeses and cured meats like prosciutto or buđola, the Bonkulović brand, or ajvar Bakina zimnica, and flour Panonica are actually its private labels. Plodine today also has a considerable number of its private labels, but the interesting aspect of their assortment is that this, still specifically Croatian retail chain, gives its private labels mostly foreign names. Its private labels are Doline, Fresh garden, Campo, Frizo, Green fields, Barba, Evergreen, B&B, Enens, Softy, Friends, and Dix. The Tommy retail chain also offers customers a wide selection of products under its private labels in most product categories. Customers are attracted by the story that its private labels offer consumers variety, reliability, quality, and consistently favorable prices.

One year after the opening of the first Eurospin in Croatia, this Italian discounter continues to open new stores. Although it was initially written that it would sell only and exclusively its private labels in our market, it seems that it has well researched the market it is entering and has offered our consumers some products, such as cracklings, for example, which are not in the assortment of its private labels. However, they still claim that their main advantage is precisely the fact that they have their private labels:

– The main feature of Eurospin is that it is the only discount store chain in Europe that sells exclusively its private labels. In Eurospin stores, there are no classic brands as in other supermarkets, but exclusively products that our team of experts has designed and carefully selected for its customers, through a network of selected partners – it states on Eurospin’s Croatian web pages.

Unceasing rise

Not only traditional retailers invest in private labels, and as emphasized by Vanja Vuljak, executive director of category management at Tokić and a member of the Board for private labels, this company has been investing in its private labels since 2008, and currently, the share of such products in the total assortment is seven percent, of which five percent is occupied by the TQ assortment.

– The TQ assortment is tailored to different categories of customers and is the only one among private labels in auto parts to offer premium brands instead of cheap alternatives, which is a characteristic of private labels, thus becoming the first choice for customers – Vuljak explained.

Private labels among Croatian manufacturers are well accepted, their development has been intense over the past decade, and year by year they achieve significant growth, so it can be assumed that the popularity of such products will continue to rise. Predictions are that the rise of private labels will continue in the coming years – both in Croatia and globally. The reason for this is certainly not just the price, as consumers, becoming familiar with new brands on the market, have developed trust, but the key factor – obtaining value for their money.

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