Private labels a perspective niche for retailers

  • 2003-02-20
  • Ieva Tuna
RIGA

Although private label products have been on shelves in Latvia for less than a year, they are definitely here to stay.

And while each of the large supermarket chains has a unique approach to marketing its private label products, all sing the praises of this new type of foodstuff.

In the West, opting for the so-called store brand products has been a way to cut the costs of daily living for over two decades. Goods sold under the private labels of retailers' favorite grocery stores offer savings, convenience and reliability for consumers.

Some worldwide chains, such as Aldi, pride themselves on their variety of inexpensive private label products.

In Eastern Europe, however, private labels are a strange novelty, if not something that might raise the cynical consumer's eyebrow.

Still, while the price difference between leading name brand and the store's private labels varies, choosing a store brand can translate into savings of up to 30 percent, and often much more.

Rimi, the largest retailer in Latvia, leads the field in private labels. Already the company has launched two entire product lines under its own name.

Lithuania's Vilniaus Prekyba, which operates under the brand name VP Market and is the second largest retailer in Latvia with its Maxima and T-Market stores, has a total of 14 food and non-food private labels.

Finland's Kesko Food, which operates under Citymarket and Supernetto chain concepts in Latvia and wants to conquer a 25 percent share of the total grocery market in the Baltics, has both private labels and economy brands in Finland, but none in the Baltic market so far.

"Regarding Latvia, there are no concrete plans [of introducing private labels] for now. We are researching the market to see whether the customers are ready for these new ideas," said Liga Busa, marketing coordinator with Kesko Food Ltd.

Another, Latvia's Mego, the third largest retail chain in Latvia, has also opted not to stack its Baltic shelves with private label products for now.

Meanwhile, canned green peas and corn manufactured in Hungary, coffee made in Holland, olive oil produced in the U.K. and numerous other packaged food and non-food staples bearing the Rimi label have been available at Rimi supermarkets since last spring.

The latest campaign, "Svaigs un Gards" (Fresh and Tasty), featuring a locally manufactured fresh product line that includes dairy produce and bread, was launched by Rimi last fall.

For Rimi, owned by Norway's ICA Ahold and whose total investments in the Latvian market exceed 100 million lats (158.73 million euros), the process of manufacturing private label products begun with a few pilot projects - such as Rimi mineral water, manufactured by Cido.

Introduced to the supermarkets last summer, Rimi mineral water became one of the top four most purchased brands of water within weeks.

Currently, there are 15 types of goods available within Rimi and Fresh and Tasty labels at the 35 supermarkets in Latvia managed by Rimi, with three new products of flour, buckwheat and oat flakes to be added to this assortment shortly.

By the end of this year, Rimi plans to launch up to 80 new products under its private label lines.

Many Rimi-labeled - and all the Fresh and Tasty products - are made in Latvia.

Inta Krasovska, head of public relations at Rimi Latvia, noted that local suppliers have expressed considerable interest in such projects.

Kestutis Lutkus, public relations specialist with VP Market, said while customers were very interested in their private label products there has been no advertising campaigns for these goods, as it would also add to the final costs of the product.

"Roughly speaking, I don't think the ordinary customer needs to know what a private label is. They go to the store, look at the prices and make their choice," said Lutkus.

Rimi's Krasovska, on the other hand, said explanatory work about the private label concept was consistently carried out with both Rimi's employees and customers.

Lutkus was quick to explain that the concept behind VP Market's popular T-Market brand is "the best quality from the best manufacturers for a low price."

In Latvia, approximately 3 million people shop at Rimi supermarkets and hypermarkets each month, according to data provided by Krasovska.

Everita Budenovica, head of marketing at Mego Ltd., said the market of supermarket publications was very saturated, with each store putting out multiple newspapers and booklets advertising the chain.

Mego, she explained, chose coupons as a method that would draw the customers to a particular store, which it distributes via direct mail, as well as at its store locations.

According to Budenovica, the customers' response to the discount coupons was "incredibly huge."

While older people reacted more quickly at first, later research data revealed that generally people of all ages economized by using discount coupons while shopping.