The fresh produce sections of supermarkets are becoming increasingly stocked with own-labels, whose share of the shelves has risen to more than 60 per cent by volume and over 50 per cent by value according to the Private Label Marketing Association’s statistical yearbook.
Traditional brands have far less of a presence than was once the case and, though awareness levels are still running high for several well established names, their long-term future may be in jeopardy if - as the PLMA suggests - multiples continue developing their own labels at the expense of proprietary brand-labelled products.
It’s perhaps remarkable that this situation has been arrived at in barely a decade, led by the rise of supermarkets as brands in their own right and followed with sub-branded and co-branded products bearing the retailer’s increasingly powerful moniker.
“In the last 10 years or so,” says brands specialist Roger Manning of Inter-Trade International, “we’ve seen the transference of loyalty from brands which symbolized proprietary values to what were retail house names but are now brands in themselves.
“When supermarkets began developing own-brands they were basically piggy-backing on major brand names - Kellogg’s, for example, was growing the market for cornflakes and supermarkets produced own-label product to take advantage.
“The turning point came when Tesco and Asda moved away from being low-cost retailers with no frills to low-cost retailers with range, choice and flair to match Marks & Spencer, Waitrose and Sainsbury’s.
“It’s no accident that the major supermarkets have expanded from traditional grocery lines into areas such as pharmaceuticals, clothes and finance - they’ve built up consumer reassurance to the point where shoppers are favourably disposed to purchasing own-label items across a wide range of products in a way that was previously localised to a particular brand proposition.
“But where we’ve seen positive growth for the major retailers, conversely there’s been a demise amongst many household brand names. Some of them have tried to broaden their area of expertise, for example the Jaffa label has been put on citrus products from South Africa and Spain as well as Israel, but in a lot of cases they’ve simply diluted the brand proposition and that’s bound to eventually affect brand awareness levels.”
Diluting the brand proposition it may be, but Jaffa for one has benefited in sales terms if not brand enhancement from taking a pragmatic ‘if you can’t beat ‘em, join ‘em’ stance in co-branding exercises with major retailers.
Sales for the product have been boosted through co-branding with Tesco via labels including ‘Tesco Jaffa Oranges,’ ‘Tesco Jaffa Grapefruit’ and with a new line, ‘Tesco Jaffa Minneola,’ set to hit the shelves in January.
Dov Warmen, managing director of Jaffa’s UK distributor MTEX UK, says: “We have been doing this for three years now and the quantities have increased by 50 per cent year on year, so we certainly believe that this co-branding works very successfully for both MTEX and Tesco.”
Another long established proprietary brand, Capespan, has also enjoyed good results from co-branding with the big supermarkets. Like its sister company Fyffes, currently celebrating its 75th anniversary and still the biggest brand name in the UK fresh produce business, Capespan retains good awareness levels - but that could easiliy change, admits commercial director Martin Dunnett.
“Our brand awareness is 15 per cent spontaneous and 70 per cent prompted,” says Dunnett. “That’s only five or six per cent less than 10 years ago, but it is a slow leakage. We’ve always been able to trade on traditional values, triggering memories of Cape apples or Outspan oranges ate as schoolchildren. But there is a concern that, with proprietary branding tending to be less conspicuous nowadays, youngsters won’t carry those kinds of associations through to adulthood.
“We’ve been moving the brand into wider areas, for instance juices and slice’n’dice packs, and we get encouragement from supermarkets to strengthen our brand in those areas. But whereas in that environment you can make 20 per cent margins and have 10 per cent for brand development, in fresh produce the margins are only one or two per cent and so there’s no money for promotion.
“Retailers like Tesco and Morrisons are brand supportive, as were Safeway before the Morrisons deal, but Marks & Spencer, Waitrose and Sainsbury’s - which between them control about 25 per cent of the fresh produce market - want to own the product quality for their own brands and they are own-label driven.
“We can’t go into a meeting with one of the major retailers and start beating the Cape drum, but we’ve always been very positive in promoting our brand where supermarkets allow us to do so, even though it’s difficult to keep finding ways that the brand can deliver for a retailer when everybody wants a competitive advantage.
“It’s fair to say that the relationship between suppliers and supermarkets regarding branding has been a bit of a rollercoaster over the last few years. Sainsbury’s went up to around 65 per cent own-label across the board seven or eight years ago and they over did it - they had a mini-wobble and when Tesco overtook them, a lot of the ills were blamed on own-label.
“Now Sainsbury’s has moved back towards 40 to 50 per cent own-label and I feel that’s a happy medium. Fresh produce is the barometer of the supermarket and although it’s in the interests of the store to keep ownership of the shelves, I believe that traditional names like ours, with the quality they bring, can still add to the store’s offer.”
Forty or 50 per cent may be a happy medium as far as Dunnett is concerned, but if the PLMA figures are accurate then the supermarkets themselves seem to be setting their sights on much higher levels of own-label produce. That is not the view, however, of a brands specialist who has been there, done that and got the own-label T(esco)-shirt.
Independent business advisor Christine Cross, who when she was a director of Tesco headed up the development of the company’s private label brand, says: “I don’t think that own-label will grow any further.
“If a supermarket has over 50 per cent they are doing well and I don’t feel that there are any particular aspirations to take levels any higher. What supermarkets will do is keep the level of innovation growing right across the board, so when it comes to fresh that will include meat, fish and bakery as well as fruit and veg.”
If the level of own-label does indeed remain reasonably static then there will still be a place, albeit a relatively small one, for proprietary brands. But the owners of brand names who have worked hard over the years to establish their place in the market now have to accept, perhaps through quietly-gnashed teeth, that it’s in the independent sector rather than the multiples where they will retain a good visual presence.
Agrexco UK general manager Amos Orr, who has overseen a brilliantly successful year for the company known largely through its Carmel brand, probably speaks for quite a number of brand owners when he says: “The multiples are still 75 per cent of our business so their significance is not in question, but I would like to see our labels having more of a presence on supermarket shelves.
“The multiples in England have got carried away with private labels. In other parts of the world, for example the US where I lived for four years, our branding is prominent in supermarkets - they don’t kill the labels of suppliers.”
Agrexco, sponsor of the Re:fresh Food Service Supplier of the Year award in 2005, has recently re-designed the Carmel label both to freshen up the logo and to give more emphasis to the company name. “The Carmel brand is almost 50 years old and well known all over the world,” says Orr, “but growers wanted to focus more on the Agrexco name.
“The new logo will be used for all Israeli product except for our Jaffa branded citrus, but of course we source produce from areas outside Israel and the Carmel brand is strong internationally. It’s particularly strong in the UK, where the brand will play an important role in the future development of our company in growth areas such as the food service sector.”
Tapping into the growth potential of the non-multiples sector is the aim of Gomez through the recently introduced label Gomez Reserv, a premium brand which, says Steve Parmenter of the Kent-based company, is quickly establishing itself and could eventually be expanded into the consumer sector.
Not that Gomez intends to go head on against the major retailers. “It’s not wise to compare supermarkets with the non-multiples,” says Parmenter. “We don’t see Gomez Reserv as competition to the supermarkets but what we are doing is complementing their premium brands in the non-multiple sector.
“People have a perception that the produce which goes into the non-multiples is the stuff that the big supermarkets don’t want, but the independents do want quality and that’s what they’re getting with our new label.
“We did a lot of research before we launched it and we are delighted with the reaction it’s had from customers. Initially we’ll be marketing the brand only to our immediate customer base, but then the aim is to market to their customers and hopefully in the long term become a household brand name.”
Produce already on offer or set to be launched under the brand will be Spanish tomatoes on-the-vine, grapes, stone fruit, strawberries, pomegranates and citrus. “We will have a wide range of categories and our marketing message will be ‘quality secured’,” says Parmenter. “It’s all very well assuring customers of quality, but the produce has to deliver and Gomez Reserv will do that.”
If the new label, and other aggressively marketed labels like it, can secure not just quality but a firm foothold in the market place then maybe, just maybe, proprietary brands can in the long term exist healthily and profitably alongside the Finest that the multiples have to offer.
CAUGHT IN THE CROSSFIRE
In a Journal article on branding earlier this year Christine Cross, former head of private label development at Tesco but now an independent business advisor since setting up her own company 18 months ago, remarked: “Fresh produce is the only battleground left.”
It was an intriguingly provocative statement that she is happy to enlarge upon. “Fresh produce is one of the key indices of the retail business,” she says, “and it is a bit of a battleground in terms of brands.
“In the main, what the major retailers have sought to do is not go hard-line against the brand leaders but take out the secondary and tertiary brands. Now the tertiary brands you see on the shelves have a specific proposition, organic for instance, or a special claim tailored to a niche market.
“The percentage of own-label is higher in fresh produce than most areas partly because it’s harder to get up to 50 per cent or more in heavily branded areas like the five C’s - confectionary, cleaning products, cereals, cola and children’s clothes.
“In fresh produce a supermarket can take its brand across the categories - root veg, topfruit, citrus and so on - and that makes the own-brand more powerful and more likely to stick in the customer’s mind than segmental brands.
“The major retailers are already successfully own-branding pre-packed items like bagged salads and prepared fruit, and there’s also a big opportunity in loose and bagged product where supermarkets can utilise their pillar brands.”
NEW KIDS ON THE BLOCK
Own-labels now rule the supermarket fresh produce shelves. But, in the decade or so that it has taken the major retailers to put themselves in this position at the expense of proprietary brands, there have been some success stories for comparatively new brands developed during the period when so many traditional names have been sliding from view in the multiples sector.
Compared to grand old brands like Fyffes and Jaffa, bagged salads brand Florette and Pink Lady apples are the new kids on the block having both been established in the last 15 years.
Andy Macdonald, managing director of Pink Lady’s Kent based marketeers Coregeo Ltd, says: “Some of our competitors have been around for 80 or 90 years, but Pink Lady is now the third-most recognised apple in the UK and the sixth-most popular with about 10 per cent of the market.
“It’s all happened so quickly - the first container of Pink Lady into the UK was in 1995 and was split half and half between Marks & Spencer and Selfridges. By 2000, when 650,000 boxes came into the UK, major supermarkets had the apples on their shelves and last year 1.5 million boxes came over here.
“Recognition levels in the 10 months to September 2004 went up from 38 per cent to 58 per cent, partly due to our sponsorship of the Atlantic First ocean row which was a great public relations success for the Pink Lady brand.
“The branding for the apple, with the flowing heart logo, has been a major player in the success of Pink Lady and I think it’s been tremendous for the industry as a whole as well as for the brand itself.”
Like Pink Lady, the Florette brand has been aggressively marketed since its introduction to the UK and its success story looks set to continue apace.
Part of Soleco, a co-operative of farmers and growers in the Cotentin region of north-west France, Florette has operated from its Staffordshire base since 1999 and, as a measure of its growth, has in that time expanded its work-force from 49 to 350.
Already the UK’s top selling bagged salads brand, the Florette label is set to be spread into wider areas starting with the February launch of a steamed vegetable concept - Heavenly Veg - which in October received critical acclaim when the judges at October’s Sial international food exhibition in Paris handed the newly introduced range a top innovation award.
Around a third of the company’s £1.5 million 2005 TV advertising budget will be used to promote the Heavenly Veg launch and managing director Mark Newton says: “Our move into this area is part of a development strategy which will continue to see us widen our horizons.
“Supporting and promoting the brand has always been important to us and to our growth, which has been led by innovation but always with the aim of matching our product offer to what the consumer wants. It’s been a successful strategy for us to date and I’m confident it will continue to be so.”
RE-INVENTING THE ORANGE
An ‘experiential’ brand marketing agency, whose clients include Waitrose and Marks & Spencer, and which was responsible for the marketing campaign that helped the broccoli-like and relatively new product Tenderstem become established in the UK, has some advice for traditional brand name owners as well as the newer breed of product.
Arbor Brand Marketing’s Dorian Perry says: “Despite the rise of own-brand I believe there is a future for traditional brand names if they are marketed effectively.
“With Tenderstem we had a new product with a very good health story and experiential marketing techniques have certainly played a part in an 800 per cent rise in sales since the product was launched in 1999.
“More mature products need to be re-vitalised, and although you can’t re-invent the orange like you can re-invent a soap powder you can re-invent the story and experientially engage the product with the consumer.
“It doesn’t require big money on advertising campaigns - you can raise awareness levels and sales through more understated methods such as sponsorship, product endorsement and editorial mentions in the media rather than expensive advertising space.
“The marketing efforts for some of the older brand names have perhaps waned a little, but if for example new varieties are developed and new products introduced then with the correct marketing approach those traditional names could certainly be re-invigorated.”
BOXING CLEVER IN EUROPE
One of the newest English brands in the flower business has followed its initial success in the UK by expanding further into European markets.
Redbridge Produce & Flowers launched its Britfresh brand in July 2003 with the aim of providing guaranteed quality fresh produce to the independent sector and, by doing so, enabling the high street to compete with supermarket standards of availability, quality and traceability.
With a four-fold increase in volumes by July 2004, Redbridge developed its year-round pre-planned supply programme for the European sector under the brand Continental Fresh and the first products became available in early Autumn.
Blue Box brand flowers have from day one been packed in Redbridge-branded sleeves in Redbridge-branded boxes, but such was the success of Blue Box that the company has extended the concept to a Red Box brand. This carries chrysanthemums only, to a lower specification than Blue Box but still at a guaranteed quality level.
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