With the European private label sector alone set to hold a market share of 45-50% by 2025 it’s little wonder that snack manufacturers are starting to worry…
But while Rabobank analyst Sebastiaan Schreijen said the snack makers must take action, he warned that moves must be strategic.
Addressing Snackex 2013 attendees at a conference session today, Schreijen said while there are various strategies, “there’s not a magic bullet – there is no single answer of what you should do”.
“Brands need to take action against private label competition and there are different strategic options... Successful strategies include going for scale, carving out a niche and tapping into consumer loyalty,” he said.
But on the topic of operating in both the branded and private label segments simultaneously – known as ‘dual tracking’ – Schreijen warned that there are risks.
Can’t beat them, join them…
The problem with operating in both sectors is that retailers then have knowledge on your business, innovations and production for branded snacks and can then use this to make demands on private label, he explained.
“The biggest risk of combining brand and private label is that you provide too much information to the retailer.”
“Private label is growing, so there is definitely an opportunity to look at it and I can understand you might be tempted,” he told snack makers, “but be careful not to lose your branded position. Don’t make the retailer any wiser than they already are!”
Possible to succeed?
There are strategies that mean dual tracking can work, Schreijen said, but it requires “very good execution”.
The best strategy to take on is to build firewalls between each business, he said, keeping all sales and marketing completely separate.
There must be no information flow between the two teams, he said, to ensure information on the branded business is kept private from retailers.
“It’s a very fine balance.”