Germany Food And Drink Report Q2 2010 - New Market Report Published

In November 2009 German wholesaler Metro Cash & Carry unveiled a revamped private label range as it seeks to adjust its offering in response to the downturn. Metro has revealed it will now sell six private label lines - ranging between the entry-level Aro brand to the high-end Fine Food brand - and claims the products will be 10-20% cheaper than similar branded products. Metro Cash & Carry currently generates 10% of its revenues from the private label segment and has set a target of increasing the share to 20% by 2012. The move comes as German retailers are increasingly putting weight behind their private label lines to attract price-savvy shoppers away from the discount format.

Western Europe leads the way in private label consumption and includes nine of the top 10 countries in terms of private label sales as a proportion of total retail sales. Within Europe, Switzerland is the country most dominated by private labels; they account for 54% of the market. Of the four largest economies, the UK comes top of the list with 48% of products sold under private labels. Germany is not far behind with 40% of the market accounted for by private labels. However, this is largely down to the success of the discount format and many of Germany's other retailers have been slow to embrace the segment. This is demonstrated in Metro's results, with the firm only generating 10% of its revenues from the private label sector.

This has meant that the proportion of products sold under private labels in Germany has stagnated over the last three years, while in nearly every other European country it has advanced. Yet there are now clear signs that this is set to change, with Germany's major retailers, such as Metro, Edeka and Rewe, all increasing their focus on the segment. While large retailers in other European countries have for a long time capitalised on the strength of their brand this strategy has only just been embraced in Germany.

'We've had our own brands for years, but we are now pushing them a lot more - they are one of our business cards', said a spokesperson for Edeka recently.

Although bringing benefits to mass grocery retailers in terms of sales and margins, this trend is rightly viewed with apprehension by manufacturers of branded products who face a significant threat to their market share. In response manufacturers have ploughed more money into innovation to keep a clear divide between what they are offering and what private label brands can offer. This strategy has had some success in slowing the rise of private label products; however, with retailers across Europe now upping their own pace of innovation and in a strong position to quickly recognise changes in consumption thanks to their unique access to sales data, the continued rise of private label products in Germany and elsewhere looks inevitable.

Germany Food and Drink Report Q2 2010: http://www.companiesandmarkets.com/r.ashx?id=IX36268U2271633&prk=b620812ce55f4720b6ad4eb06e38cc05