According to ACNielsen, the European Private label market is worth over €100 billion and shows continuous growth year on year. Of the top ten countries with the highest value market share of private label in the world, nine are European. Ranking number ten is the United States with a value share of 20 per cent.
Why are private labels so successful in Europe? Research in the second half of 2006 by IPLC shows European retailers’ ability – in collaboration with their suppliers of private labels – to pick up trends and consumer benefits which are subsequently translated into new, value-added private label lines. The study focused on eight European countries (Table 1).

Table 1:

Strategic advantage
The days that all private labels were merely imitation brands have gone and many retailers – like the leading examples just mentioned – have created valued brands in their own right. Private labels that have become an everyday feature of consumers’ lives and, as a result, have earned loyalty. This allows retailers to target consumer groups with specific store brands that are natural spin offs of their store concept’s strong consumer franchise. This enables these retailers to efficiently latch onto trends and developments in the market.
Such a differentiated private label strategy based on clever market segmentation offers retailers a unique opportunity to launch multi-category sub-brands by far greater numbers than any single branded manufacturer can. Even the world’s largest branded manufacturers like Nestlé, Procter & Gamble, Mars or Unilever do not cover all food and non-food categories. They usually build brand equity around a single or a limited number of product categories. This, however, does not apply to private label, which stretches itself across a wide range of product groups. This gives the retailer a phenomenal strategic advantage as he can independently define niches and subsequently offer sub-brands to cover these with products in a clearly recognisable packaging. This is exactly what is currently happening with the major European retailers.
Research in the eight markets mentioned in table 1 clearly demonstrates this. In these markets, private labels accounted for sales shares ranging from 24 to 49 per cent. And almost without exception this concerns private labels communicating the store brand name. This is clearly different from the situation in North America where private labels – which are often referred to as ‘store brands’ – are in many cases fancy labels that are owned by the retailer but do not refer to the retailer’s branded store name.

Sub-branding
The high market shares of private labels in the eight researched European markets can be explained by retailers’ sub-branding strategies. Apart from their regular private label, retailers added price-aggressive budget (or value) lines and quality-focused premium lines to their private label product mix. This classical three-tier (good-better-best) segmentation characterises the private label strategy of most leading European retailers.
Furthermore, sub-branding of private labels is also thematic, latching onto trends and developments in society. There is a strong request in Europe’s markets for products appealing to health and wellness. A second key trend is ethical consumption. Thirdly, private labels specifically focused on children and finally there is a trend towards culinary products.
Below a schematic overview of the main groups of private labels in Europe and their sub-brandings:

The IPLC book ‘Private labels in Europe – trends and challenges for retailers and manufacturers’ elaborately describes and explains these groups and their sub-brandings at 28 leading retailers in Europe.

Products with health claims
The fight against obesity and the aim towards healthy and conscious consumption has become a global trend to which retailers increasingly attune their private labels’ sub-branding. They offer, for example, products that are low in fat, have controlled salt and sugar levels, or are high in fibre. In other cases artificial colours, flavours and flavour enhancers have been removed and/or vitamins and minerals have been added.
Another target is reducing the use of hydrogenated fat in food. Fats of this type are the main source of trans fat in our diet. Trans fat increases the risk of obesity and subsequently cardiovascular disease, and has been linked to some forms of cancer. In the UK, Tesco, ASDA and Sainsbury’s even announced deadlines for removing hydrogenated fats from all their own label lines by early 2007. Marks & Spencer has been more active in this respect and halted their use from March 2006.

Regional products
Regional private labels – like premium private labels – enable retailers interesting opportunities to distinguish themselves from competition – both retailers as branded goods suppliers – and create shopper preference.
Not surprisingly, France, with its rich gastronomic heritage, is the cradle of regional culinary sub-brands under private label. French consumers appreciate authenticity and the refined taste of culinary product specialities. Regional culinary sub-brands under private label reached the shelves of several retailers in Europe and their positioning is more or less similar to the premium private labels of British, Swiss and Dutch retailers.
Such regional private labels are clearly recognisable and via their packaging communicate that they have been prepared using authentic, traditional recipes. In France for instance, the branding appeals to the diversity in French cuisine. Brand names like ‘Reflets de France’ (Carrefour), ‘Les Délices de Belle France’ (Francap), ‘Nos Régions ont du Talent’ (Leclerc) and ‘Patrimoine Gourmand’ (Cora) enable consumers to reinvent regional or historical products. Examples of regional private labels in other countries are ‘De Nuesta Terra’ (Carrefour Spain), Fior Fiore (Coop Italia), ‘Sapori & Dintorni’ (Conad, Italy) and ’s Lands souvenirs’ (Carrefour Belgium).

Conclusions
On a global scale it can be expected that market shares of private labels will continue to grow. The European market – with its diversity in cultures and eating habits – will be a true source of inspiration to both retailers and suppliers. Latching onto trends and developments in society and the subsequent thematic sub-branding of private labels will surely be of inspirational value to more sophisticated private label strategies for other retailers across the globe. The premium, healthy and organic private label lines are expected to be the main growth drivers of private labels’ market shares. These products are best suited to respond to the worldwide consumer trend for more sophisticated and healthier products, and the retailers’ intention to build customer loyalty while improving return on sales.