home Work and education Private label products. How to make goods for a large chain

Private label products. How to make goods for a large chain

When shopping in the stores of any retail chain of grocery supermarkets, we often see packaging of goods with the logo of this chain on the shelves. These are so-called private labels.

Most large retail chains produce goods under such brands, sometimes there may even be several of them - this trend is typical for most countries of the world. The share of private label sales is approximately 15-17% of total sales, this number is growing every year and varies depending on the country, sometimes reaching up to 80%.

The most important feature of private label products is usually, although not always, that they are cheap. Most often, the price for such products is lower than for analogues of other brands, which makes such brands popular. And several factors allow you to lower the price. Such brands are not advertised using traditional means; they are promoted directly in the process of the buyer choosing a product at the point of purchase, which means that marketing and advertising costs are significantly reduced. The network can also control the production process of such goods and, accordingly, their cost. For such brands, the costs of logistics and distribution are also significantly reduced, the costs of packaging goods and its design are also reduced, and the number of intermediaries between the chain and the manufacturer is reduced.

Although there are exceptions - retail chains sometimes present premium brands at a higher price than their analogues, emphasizing their higher quality and freshness when it comes to food products.

Red price

The trading network "" represents about 90 own brands on the market. The most famous of them is the “Red Price” brand; about two hundred products are represented under it. It is emphasized that the price of products under this brand is significantly lower than analogues, while the quality meets all norms and standards. The company holds tenders for the production of products under its own brand and cooperates with several manufacturers, such as Extra M, Glavprodukt, Erkonproduct and others. At the same time, due to the advantages of releasing goods under its own brand, packaging of products from the same manufacturer can cost more under its own brand and cheaper under the “Red Price” brand.

Simply ABC

The Azbuka Vkusa network represents five brands - Simply Azbuka, Selection, Our Farm, as well as home-made culinary brands Almost Ready! and “Already ready.”

Our family

The trading network "" has more than 30 own brands. Some of them, for example, the Auchan brand, are about 20% cheaper than similar brands. One of the most popular is the “Our Family” brand.

Crossroads

The trading network "" introduced the brand of the same name to the market as the very first in Russia, back in 2001. The hypermarket chain actively uses the trademarks of its production - customers are familiar with the brands “Prosto”, “Green Edge”, “Market. Crossroads", "New Ocean", "Chef. Crossroads", Bonte.

D

The "" chain represents its "D" brand, as well as other in-house brands, for example, "First Things", which sells basic food products, and the Baby Boom diaper brand.

All year round

The supermarket chain "" offers customers products under its own brand "All Year Round", and for food products - "Appetizingly All Year Round".

Our product

The company "", the owner of the retail chain of the same name, has owned its own trademark “OUR Product” since 2005. The chain also puts on shelves products under the Seventh Continent brand. Most private label products are food products.

Magnit's own brands

The retail chain "" sells more than 1,000 products under its own brands. These are brands such as “Sweetness to the People!”, “Holiday of the Sweet”, “Master Shine”, “Silk Ribbon”, “Family Secrets”, “Culinary Secret”, “Northern Harbor” and many others.

Ribbon

Owns its own brand in the middle price segment - “Lenta” and a brand in the lower price segment “365 days”. You can also purchase products from the following private brands at Lenta: Home Club, Giardino Club, Lentel, Sport Club, Friend Made and others.

Billa Premium and Clever

Popular private brands of the Billa network are Billa Premium, Billa and Clever. They differ in price categories and target audience. The range of private brands already includes about 450 products.

Own brands of the Monetka chain

The "" network represents the trademarks "Correct Decision", O'Green, HeadLiner, Fossa, EverClean, Sofita, Aland, Parkline, Magic Snow, GAZ_ON and Favorite Label. All private brands strive for an optimal price-quality balance.

OK

The 7Ya SemYA, Victoria, Victoria, Mosmart, SPAR and many other retail chains also produce products under their own brands.

Leonid Abayushkin, General Director of the Federal Purchasing Union CJSC System T3S, Moscow

How to find the right supplier
Is it worth selling a branded product similar to your own?
How to design packaging for your products
How to choose a product for production under your own brand
How to make private label products in demand

Production of goods own brand dictated by market realities. It is no secret that with increasing competition, the margin from branded goods is directed by transcontinental corporations and simply large manufacturers to aggressive advertising. Due to intrusive advertising, such products are in demand by consumers. And the more in demand they are, the greater the dependence on them becomes for the retailer, who is forced to sell them. The conditions in this case are dictated by the manufacturer. Therefore, large retailers are striving to create their own management of both the brand and margins. This is essentially the idea behind private labels. (products of own brands - private label - Editor's note).

How to use private label products to improve your store's image

In Russia, the production of private labels is only gaining momentum, while in the assortment of Western retail chains, goods under their own brand sometimes predominate. Their share in the assortment varies depending on the type of store:

in discounters - 80%;
in regular supermarkets - 30–40%.

The norm is a situation where private labels occupy a third of the turnover and revenue of a foreign retailer, and two-thirds of the margin. The network can no longer exist without these goods: it will simply be economically untenable. And this is a general trend in market development, and not an isolated example.

And although domestic retailers, when creating private labels, use the same criteria as foreign ones - low price, popular product category - this cannot be called simple copying. Now the world market is developing progressively, and, accordingly, the need for changes is natural. It’s just that, as a rule, changes appear earlier in Europe and America than in Russia.

So far, additional benefit does not play a big role for them - a criterion that is actively used by Western retailers. Namely, foreign stores pay special attention to healthy, environmentally friendly products. Among Russian companies, few use this approach in competition with branded goods. But in vain.

Private label products from alcohol to pet food

Since the Federal Purchasing Union "T3S System" was created in order to help retailers extract more economic benefits from their activities, we are obliged to create private labels - this is a priority direction of development.

Today we produce products in the lower and middle price segments.

They are often similar in appearance to leading brands on the market. Of course, we are not talking about mixing brands, but there is a leading product in the segment, and it is logical to build on it. We are not the first to do this.

Almost all key categories of food and non-food products are produced under T3S Systems’ own trademarks: from alcohol to animal feed. There are six main brands in total. It would be wrong to say that some of them are more significant and some less. Each brand is created for a specific group of goods.

All brands are umbrella (names of products in which the name of the manufacturing company dominates, and advertising of the company’s products displays its logo. - Editor’s note). Accordingly, their name should fit well with the maximum range of products and be universal. Although, of course, there is an emotional component. For example, in the brand name “Praise”. Praise is a bright word that carries approval of the product, taste, quality and, finally, the manufacturer.

Average share of private label articles in networks included in the T3S System:

in network income - 6%;
in network turnover - 4%;
in assortment - 2.5%.

I would like to emphasize that this is the “average temperature in the hospital.” In some networks these figures are 3–4 times higher, but in some they are lower. In general, everything depends on the retailer’s attitude towards its own brand. Giving these products the right place on the shelf through display and other merchandising means can help grab the customer's attention. Well, since the cost of a private label with similar quality is always lower than a branded analogue, sales of these goods will increase.

Since we already produce products in most product categories. In order to choose which goods to produce, we analyze the assortment matrices of the networks included in the T3S System, study analytics of consumer preferences, etc.

As they enter other price categories and become more clearly structured according to product range, brands may change. Based on Western experience, you can successfully manage 25–30 private brands. And the brand should be limited by price positioning or category.

Production under our own brand

We do not have our own production. We produce all private label products at enterprises that have proven themselves on the positive side in the market with proven and guaranteed quality and a well-functioning management system. Often the same enterprises make products under well-known brands.

We cooperate with manufacturers who:

understand why it is profitable for them to produce private labels;
are cost leaders in their field;
have experience in producing goods with the selected level of quality.

We hold tenders for the production of each item. Next, at the initial stage of work, we approve the recipe and obtain control samples. Organoleptics (a method for determining product quality indicators based on an analysis of the perceptions of human organs. - Editor’s note) the product is controlled using these samples. They are tested in certified laboratories for safety and compliance with GOST and TU.

Third party companies also design and produce packaging. Today we are developing budget private label lines. Accordingly, simplified packaging is used. You can't make an expensive wrapper for a cheap product. Today we deliberately simplify packaging, making it primitive. As we enter more expensive price segments, the quality of the approach to packaging design and the emotional, image presentation of the product will certainly change.

Store traffic: how to measure outlet traffic yourself

The practitioner tells

Maxim Kozuro, Head of the chain of stores "Family Capital", St. Petersburg

When opening the store, we wanted to attract customers with a unique offer. Entering the market only with branded products is now useless: you will not be different from your competitors. Therefore, we initially launched production, and on its basis we opened a chain of stores under our own brand.

We ourselves began to produce almost the entire line of dairy and fermented milk products (milk, baked milk, kefir, fermented baked milk, yoghurts, sour cream, butter, cottage cheese), except for cheeses. They also opened a sausage shop that produces doctor’s sausage, minced ham sausage, premium ham, frankfurters and small sausages. We are aimed specifically at producing products of daily demand, and not delicacies. This is also why they planned to organize bread production. Now we produce, in addition to bakery products, pasta.

The name “Family Capital” was chosen to emphasize family values and promotion of a healthy lifestyle. We deliberately refused to sell, let alone produce, unnatural products, alcohol and cigarettes, in order to emphasize that our products are for those who care about their families.

We do almost everything ourselves, even packaging. The concept of the logo and packaging was developed by our in-house designer, and we produce the packaging at our own facilities.

We only buy raw materials for now. For example, milk is supplied to us from one of the farms in the Leningrad region, and first it goes to the laboratory. We specially purchased the necessary equipment, and all incoming raw materials are accepted by laboratory technicians.

We look for suppliers both on the Internet and by calling farms. Sometimes we just go to the farming areas of the region, look around, get to know the owners of the farms we like. Unfortunately, there is no single database that is currently relevant; independent search is still more effective. When discussing cooperation with suppliers, we always inspect the farm: what the animals are fed, how they are kept. If we are satisfied with everything and the farmer’s documents are in order, we enter into an agreement with him. For now we are working only with large farms, and we are also planning to start our own farm in the near future.

If you compare “Family Capital” with the private brands of large chains, the difference in price is immediately noticeable. Their products are usually in the economy class segment, but we cannot position our product in this way. Even compared to third-party manufacturers, our price per liter or kilogram is higher. But this is a very reasonable price for the quality offered. Moreover, it should be taken into account that buyers will not find analogues to our products from competitors, since natural products are now sold only by companies specializing in this and are not available for sale in stores.

The experience of the first two stores of the chain, which sold products of other brands, shows that the demand for our products greatly exceeds the demand for similar products from other brands. Therefore, now in all stores the assortment is represented only by our products.

Now we plan to produce 100% of everyday products under our own brand.

Packaging for private label products

Maria Adamova, Marketing Director of the U2B group holding. Packaging for business", Zheleznodorozhny (Moscow region)

One of the effective ways to get customers to pay attention to a product is thoughtful packaging. An important point: packaging of private label products cannot be expensive.

Who should be entrusted with creating packaging for private labels?

There are several options for organizing work on creating private labels.

The chain turns to a manufacturer who has all the necessary equipment for the production and packaging of private labels.
The chain itself is developing its production line, that is, creating the necessary capacity to produce cakes, semi-finished meat products, etc. For this, equipment is purchased, including packaging, and all procedures are fully controlled. For example, for packaging in chain stores, the simplest thermal packaging equipment of the “hot table” type is used. The product to be packaged is placed on a pallet (tray) of the appropriate size, the tray with the product is wrapped in food stretch film (PVC) and sealed on a heating table.
The chain entrusts the development of packaging to a specialized company (outsourcing).
A large manufacturer has its own chain of stores, through which it primarily sells goods under its own brand; Accordingly, the packaging is developed by him independently.

Some European chains own not only large processing plants (for example, the meat industry), but also agricultural land. Thus, the entire production chain is under the control of the retail network. The development of a similar scenario is also possible in Russia: for example, in the fall of 2010, the Thunder company (Magnit store chain) invested about 8 billion rubles. in the construction of a greenhouse complex in the Dinsky district of the Krasnodar Territory due to the fact that the managers of the network were not satisfied with the work of the suppliers of fruits and vegetables.

Packaging development stages

When developing packaging for private labels, it is necessary to proceed from the consumer properties of the product, requirements for shelf life, and market demands.

Stage 1. Collecting ideas. A special service of the store, responsible for bringing private labels to the market (or the corresponding division of the manufacturing plant), analyzes competitors' products and offers possible packaging options. Ideas on how to package a particular product can also come from suppliers of packaging materials.

Stage 2. Design development. The chain can develop the design of private label and packaging independently or use the services of a branding agency. It is best if the packaging design, as well as its shape, is developed when the brand is launched on the market by a branding agency that has relevant experience with the product of this product category.

As surveys show, buyers recognize private label networks based on two criteria:

the name of the brand and the retail chain are the same;
The product packaging is designed in the corporate style.

For STM, the name of the network is taken. As a rule, networks first create private labels in the low price segment according to the principle “the quality is the same as the products of recognized brands or a little worse, but the price is significantly lower.” The brand name is formed by adding to the name of the network a word indicating the price benefit of the product: Carrefour Discount with discount), Tesco Value Tesco price). Later, private labels are launched in the middle and high price segments. In the first of them, when naming a brand, only the name of the network is most often used (without qualifying words). And the brand name for premium-segment products is formed by adding to the name of the chain a word indicating the exclusivity and sophistication of the product: Carrefour Selection choice of Carrefour store), Tesco Finest the best from Tesco).

If the names of the chain and the private label coincide, the attitude of customers towards the store, as a rule, is transferred to the trademark. This makes it possible to more clearly control fluctuations in demand: if customer loyalty decreases, private label sales fall. I consider the private label chain of stores “Perekrestok” to be a successful example (the names of the brand and the chain are the same). The packaging design is made in a laconic style: the brand name is on a white background, and a lot of space is devoted to the image of the product itself. Everything is quite simple, but it’s hard not to notice Perekrestok’s products on the shelf.

It is worth noting that most chains produce both food products (dairy products, juices, semi-finished meat products, chocolate) and non-food products under private label, so the packaging design must be universal - then the chain’s advertising will immediately apply to all goods produced under private label.

Private label has a unique name. The store does not always give its name to the private label. For example, the French chain Auchan has several private labels, the names of which do not say anything about belonging to the chain: “Patch of Good Luck”, “Sweet Island”, “Our Meal”, etc. The design of product packaging also often does not correspond to the corporate style of the store. In this case, consumers do not recognize the brand of the network, and this leads to fluctuations in demand and difficulties in forecasting it. At the same time, releasing a brand under a name different from the chain one has advantages, because in case of problems with the quality of some products, buyers do not transfer their dissatisfaction to other goods sold under other brands. This approach is often used to create brands for economy segment products. However, the original name is also assigned to premium segment product brands, and then the connection with the chain brand is maintained at the design level. For example, this is illustrated by the logo of the Auchan network (a bird) in the design of the Mmm!

Trademark: how to register, use and protect

The practitioner tells

Danny Perekalski Marketing Director of the Dixie Group, Moscow

A special division is engaged in the creation and launch of private labels in the Dixie network. The design project manager is responsible for the development of packaging; he acts as a link between designers, manufacturers and partner printing houses.

The design development and selection of packaging for each product takes place in several stages and takes one to two months. The packaging of all goods is made at specialized enterprises and printing houses, then sent to manufacturers who package and pack the goods.

93% of all private labels in the chain are domestic products (the remaining 7% are imports: olives, olive oil, wine, canned vegetables). To date, the private trademark “D” has been assigned to 98 positions, including cereals, groceries, frozen berries and vegetables, canned vegetables, a line of snacks and dried fruits, preserved fish, olive and sunflower oil, drinking water, and wet wipes. The packaging of products for different product categories under the “D” brand is designed in the same style, but to highlight different products in the same line, we use additional color elements. For example, sparkling and still water "D" are indicated by different shades of blue.

Stage 3. Testing samples and ordering a trial batch

The manufacturer draws drawings and makes test samples of packaging. When testing, the following characteristics are especially important: shelf life, appearance, safety during storage and transportation. The tested packaging option is approved by an expert commission of the manufacturer and retail chain. The commission may include technologists, marketers, and the head of the sales department. The decision is usually made by the General Director, or the commercial director, or the head of the marketing department. Then a small batch of packaging is ordered, and the products appear on the shelves of the network. If the product is in good demand and there are no problems in the entire distribution chain, they move on to large quantities.

What types of packaging are used most often?

The choice of the optimal packaging option, of course, will depend on the properties of the product. Thus, for the convenience of storing food in the refrigerator or heating it in a microwave oven, choose packaging made from frost-resistant or heat-resistant materials. Polyethylene terephthalate (PET), in particular, has such properties. It is also often used to make packaging for carbonated drinks, butter and any dairy products. So-called doy-packs are produced from PET film laminated with polyethylene - bags with a lid and bottom for packaging mayonnaise and ketchup. When packaging fish and meat products, PET films are used mainly for slicing.

Polypropylene is also popular among domestic manufacturers. The film made from it is suitable for packaging bread and bakery products, vegetables, fruits, flowers and other goods.

Dairy products on the Russian market are presented in cardboard boxes, plastic bags or bottles, while in Europe preference is given to paper and cardboard packaging, as it is more environmentally friendly . Manufacturers try not to use glass: its fragility and weight create problems during transportation. In addition, the leakage of glass containers does not allow the product to be stored for a long time (see also: Examples of convenient packaging of goods under private label).

Examples of convenient packaging of goods under private label

Canned foods can be packaged in easy-to-open tins. Bottles with vegetable oil must have special dividers to make it easy to pour the contents. Cereal bags can be equipped with convenient valves for re-closing.

Other options for convenient packaging are shelf ready packaging (English – packaging ready for display; the product is packed in boxes and displayed on the shelf in this form) and multi-pack (English – container for several items combined in one package; example – 12 bottles in packaging with a handle for transportation).

How to reduce costs for private label packaging

The share of packaging costs in the cost of a product can range from 1 to 10% or even more: fluctuations depend on the packaging materials and equipment used. For almost every type of packaging, you can find the best solution in terms of quality, cost and attractiveness for the buyer.

An example of savings due to equipment and materials. When packaging bakery products, the cost of packaging in a bag with a clip can be 10%, and when packaging in polypropylene film - 1%. However, we must not forget about the cost of packaging equipment. Thus, for packaging in cast bags, you can get by with a small and inexpensive clipper, but for packaging in film, more expensive equipment is more likely to be required.

You can save money by optimizing the operation of packaging equipment and choosing the most suitable material. Let's compare two types of shrink film - polyolefin and PVC. PVC film with a thickness of 15 microns has a density of 1.35 g per cubic meter. cm, and the density of polyolefin of the same thickness is 0.92 g per cubic meter. cm. Therefore, a polyolefin roller weighing 20 kg will contain approximately 40% more film than a PVC roller of the same mass. Moreover, 15 micron polyolefin film can be used instead of 20 micron PVC film, providing additional benefits.

If you use plastic packaging for confectionery products, then in some cases you can select options from thinner plastic (however, its density should be sufficient for storage and transportation) and save up to 15% of packaging material.

An example of saving on design. Reducing the number of colors in an original design often does not affect sales, but allows you to save on the production of packaging materials. So, if you are going to pack bread in polypropylene film with the symbols of your company and purchased horizontal packaging equipment, then factors such as the number of colors in the package, the area and saturation of the fill, and the circulation will be important for the cost. By optimizing each of these factors, you can reduce the cost of film by 20%.

The practitioner tells

Kirill Mursepp, Director of private label management at Lenta, St. Petersburg

Packaging for private label goods, like the product itself, is produced at the supplier’s enterprise. We include in the annex to the supply contract requirements for the material, size, strength, safety of packaging and its labeling.

The cost of packaging and its share in the price of the product depend on the category of goods. For example, the cost of packaging bakery goods in polymer bags with the company logo is minimal. Packaging design for cheap goods is simpler: it should be concise, since buyers are attracted primarily by the price, not the design. In our stores this is the trademark “365 days”. The packaging of mid- and high-segment goods requires painstaking work by the designer: when purchasing goods of these categories, the buyer first of all focuses on the attractiveness of the packaging, and then evaluates the composition of the product, its taste, etc. Moreover, high-segment private label goods compete on the shelf with goods -analogues of leading companies and, therefore, must have an attractive appearance. For example, in our stores these are confectionery products of the Dolce Albero brand: the design (stylish logo on a light brown background) was developed in such a way that consumers would highlight this product as a premium one.

Expert advice

Alexander Tremasov, General Director of the Tremasov printing house network, Ivanovo

When developing a design project for your own products, you need to determine exactly who you are targeting, what emotions you want to evoke in the buyer, and based on this, think through all the details. The correspondence between the presentation of the product and its price is very important: a simple or too contrasting design evokes associations more with economy class goods, while the presence of small elements and deep colors create more confidence in the quality of the product. If a product looks more expensive than it costs, the buyer will decide that it is a scam, just as in the opposite situation.

Our company works with several private label manufacturers. In addition to custom printing, we also offer design services. Quite often we come across the fact that a customer comes with a requirement that goes something like this: “Make us this - we have this general design.” But we see that the layout he offers is already very outdated; buyers will have neither interest nor trust in it.

People love new things. To ensure that a product is always in demand, it is necessary to constantly change the packaging design. But it is important to do this competently, so as not to scare away customers with its exaggerated novelty. We have clients who constantly change the design of their products, but only slightly, so that the buyer continues to recognize their product. Some people order two types of packaging for the same product at the same time.

We are currently preparing a packaging design for meat products. It took a lot of work to convince the customer to change the design, but as a result the packaging looks much better and matches the price.

CJSC System T3S
Year founded: 2007
Staff: 60 people
Type of activity: concludes supply and marketing agreements with federal suppliers, coordinates and consolidates centralized orders, purchases and supplies of products for retail chains
Structure: within the framework of the Federal Purchasing Union CJSC System T3S, there are 48 networks with a total number of stores more than 1,800 and a consolidated trade turnover of about $1.9 billion. The total area is approximately 700 thousand m2; daily customer flow - more than 2 million people

Family Capital LLC
Year of creation: 2011
Number of stores: 8
Staff: 16 people
Area: from 20 to 50 m2
Turnover and profit: not disclosed

LLC "Chain of Printing Houses "Tremasov"
Year founded: 2002
Staff: 33 people
Services: custom printing of labels for products, production of plastic cards (including discount and payment cards), identification cards, plastic price tags, etc.

Maria Adamova Graduated from Vyatka State Humanitarian University with a degree in marketing and advertising. He has been promoting the company since 2006.

U2B group LLC. Packaging for business"
Field of activity: packaging production, supply of equipment and packaging materials
Territory: head office - in Zheleznodorozhny (Moscow region), representative offices - in Moscow, Yekaterinburg, Izhevsk, Yoshkar-Ola, Kazan, Kirov, Naberezhnye Chelny, Perm, Syktyvkar, Ufa, Cheboksary, Chelyabinsk
Number of personnel: more than 200
Number of company clients: more than 6,000 food industry and trade enterprises

Lenta LLC
Territory: head office – in St. Petersburg; regional representative offices - in Moscow, Volgograd, Nizhny Novgorod, Novosibirsk; 68 hypermarkets and 7 supermarkets operate in 39 cities of Russia
Number of employees: 22,000
Total retail area of hyper- and supermarkets: 445,000 sq. m

Dixie Group of Companies
Field of activity: retail trade in food and consumer goods
Number of employees: approximately 40,000
Retail area: 583,583 sq. m
Revenue: 147 billion rubles.

Heat-shrink films are polymer films that can shrink and tightly fit a product under the influence of temperature.

Horizontal type equipment is used for packing piece food and non-food products into a three-seam pillow-type bag, which is formed from a roll of film. This type of equipment is also called flow-pack (English) in-line packaging). The packaging process on horizontal machines is high-speed.

Almost all retail chains consider the production of goods under their own brands () one of the most important strategic tasks. What should an entrepreneur do who has set out to establish cooperation in the field of contract manufacturing of any goods for his retail network? There are several options, and we’ll talk about them in this article.

Retailers interested in creating private label products typically choose one of two options. The first (more labor-intensive) is the independent creation of a brand, product, establishing a promotion and sales system, and so on. The second (simpler) is to start cooperation with a private label manufacturer, which has a number of advantages - a transparent income model and network guarantees that promise a stable income.

The release of goods under private labels often becomes the most profitable vector of development for manufacturers, since it provides guaranteed volumes of products, joint purchases of components with the network, and guarantees for the repurchase of leftovers. In addition, the manufacturer does not need to create a sales department and develop sales channels.

The most common problem that retail chain owners face when they want to hire a contract manufacturer is actually finding a manufacturer. So, what are the ways to find production from a Russian entrepreneur?

Contact an industry organization, which will provide all the necessary data on entrepreneurs in a certain industry and region.
For example, if an entrepreneur plans to replenish the shelves of his stores with dairy products, then it makes sense to contact the National Union of Milk Producers.
Visit the annual exhibition “IPLS Own Trademark” and acquire the necessary contacts and connections.

Prices for goods of chains' own brands (STM or private label) are 15–30% lower than retail prices for goods that are analogous to well-known brands. In times of crisis, 83% of Russians constantly buy private label goods, so both manufacturers and retailers benefit from this format. The Secret talked to companies that make products under retail chain brands and found out how they work and what to worry about.

Taras Kozhanov

Director of Lukoz Saba, Deputy Director of Sernur Cheese Factory

Our company is one of Russia's largest producers of cheese, dairy products, and baby food made from goat and cow milk. In Mari El, where our plant is located, the consumer is loyal to the brand, but the republic has a limited number of residents, so it is necessary to develop and increase production at the expense of other regions. Of course, our goal in supplies is Moscow, St. Petersburg, cities with a population of over a million. Therefore, we chose the private label format, which accounts for 35% of our total production volume.

How we started

It so happened that we were not the first to contact retailers, but rather they found us. At the beginning of the 2000s, we presented our products - goat milk yoghurts - at national exhibitions. At one exhibition we met an entrepreneur (Taras Kozhanov refused to name him. - Note from “Secret”), who proposed to release a product under his brand “Useful Products”. He also proposed our product to “Azbuka Vkusa” and agreed to supply it under his own brand to the “Our Farm” chain. So we started releasing under two private labels at once. This was very important for us, because “Our Farm” symbolizes high-quality products from domestic producers, and it is a very honor to be included in the “ABC of Taste” suppliers. For the next three years, the situation did not change fundamentally; the volume of products produced under these two brands accounted for up to 80% of our total volume of goat milk products.

How they developed

In 2013, the Izbenka chain developed dynamically on the Moscow market. We had a surplus of goat milk, and Izbyonka’s suppliers could not cope with the network’s demands. This problem could be easily calculated, since there is a seasonal shortage of goat milk in January-February. I contacted them myself and offered to collaborate. The principal condition of the customer was the use of a specific bottle and label with their logo. The cooperation started out difficult, we suffered losses due to the fact that the retailer was only interested in supplying goat milk, so the cars were running empty. But after two months the range was expanded and it became easier to work. Now we supply 16 SKUs (product items) to Izbyonka and VkusVilla, and the monthly sales volume in this chain has increased 15 times over three years. Now the products of “Izbenka” make up 25–27% of our turnover, and “Azbuki Vkusa” - about 10–12%.

There is another example of a private label: the customer is not a retail chain, but a large wholesaler, as in our case with “Useful Products”. Our 35–40% of private label products are products for wholesalers. Typically, such a trading company has a portfolio of its own brands and acts as a distributor of several industries at once.

What did you learn?

“Izbenka” is a unique retail chain. With a large number of stores, it is quite loyal to suppliers in matters of pricing, delivery schedules, and product line. Neither the minimum nor the maximum volume of supply is regulated; this is a common practice in private label cooperation - the supplier undertakes to fulfill the network’s orders in accordance with needs.

With federal retail chains, everything is different; purchases are often carried out on tender terms; they have a wide geography of supplies and large volumes of orders. In this regard, the private label of the “federals” may not be so useful for small manufacturers, because the fines for failure to supply private label products are the highest. Most often, 100% compensation is prescribed for the amount of underdelivery and a fine, the amount of which I cannot announce.

Until the company has a clear understanding of whether it will make a profit from selling products under a private label, there is no need to rush into shipments. It is necessary to carefully spell out the conditions for stopping supplies in the event “if something goes wrong,” because a label will be made especially for the supplier, the network’s sales plans will be broadcast on it, so its technical or financial problems will subsequently be of little interest to it. In this regard, long-term contracts (from one year) are less profitable.

I plan to increase our share of private labels in production to 50% by the end of the year both in the regions and in Moscow. The main thing is to ensure that the share of sales to one counterparty does not amount to more than 20% of your total turnover. The risks are too high.

With the advent of products under other people’s private labels, the sales volume of products under our brands “Lukoz” and “Product Sernursky” also increased. Now, when a new product appears, we launch it online under our own brand, study the demand, and then decide whether to offer it under a private label. But our brands are still local, so we prefer to bring private label products to the capital markets. The company's overall turnover increased by 27% in 2015, and two upcoming contracts can bring us another 9–10%.

Dmitry Sinitsyn

Co-founder of the company "Idigo"

Our company has been operating since 1999 and offers more than 400 product items in the field of spices and herbs. Now we produce private label products for seven large retail chains (for example, “Every Day” - private label of the Auchan hypermarket chain; IDigo does not disclose other brands due to commercial secrets. - Note from “Secret”) and several small ones. Products under our brand are sold in the same networks, but cooperation under private label does not contribute in any way to their promotion. The share of private labels in the total volume of our products does not exceed 30%. This is a principled position. If you want business sustainability, do not exceed this threshold, because a private label retailer can often replace one manufacturer with another with relative ease.

How we started

The collaboration began after I took part in a conference on private labels as part of the Private Label Moscow Congress - 2006 exhibition and created a package of private label proposals for the Ural Megamart. We were a well-known company on the Ural market and occupied 33% of the market, so winning the tender was not difficult. The retailer relied on our experience and developments in the recipe and marketing parts. We proposed packaging (format and material) and recipe, and the retailer was involved in design and promotion - the customer always takes on these tasks. Due to the territorial proximity and the lack of bureaucratic procedures, everything was done in two to three months, and at the end of 2007 we began the first shipments.

How they developed

Our next client was a large foreign retailer (the terms of the contract do not allow his name to be disclosed in the media), which was just entering the Ural market. The retailer had a perfect procedure for selecting private label suppliers, monitoring them and interacting with them. We spent about a year bringing our system up to their standards and gained invaluable experience. The requirements of domestic retailers with whom we subsequently entered into contracts were lower than these requests or were copied from them. It has become easier for us to win tenders.

We also produce our products in limited quantities under the client’s brand. I think this is no longer a private label, but rather a white label - we are not developing a new product for a network or distributor, we are taking an existing one. This concept requires much less investment and time from both the manufacturer and the retailer. If the client’s design is ready, then, as a rule, we can begin shipping in three weeks.

What did you learn?

Private label has obvious advantages - economies of scale, guaranteed orders, no additional costs for promotion. But there are also hidden disadvantages. Almost all retailers want the “best price” at which they will buy products from us and sell them locally. Their business processes are set up this way: monitoring, pressure on suppliers up to the closure of a contract or individual SKU (product item identifier), long approval procedures. As a result, prices lag behind the market, some suppliers drop quality and find themselves in an unpleasant situation - and you don’t want to lose volumes, much less work at a loss. That's why we stick to the 30% rule.

Search, new markets and non-standard solutions - all this is not for private labels. Retailers need proven products, guaranteed sales volumes, no risk and delivery in a short time (preferably tomorrow). Although there are exceptions: we recently made a private label for Perekrestok and everything, from the shape of the glass jar to the recipe, was developed individually. The result is a product that is not on the market and which you can be proud of.

Alexander Kuzmin

General Director of RusHOLTS

The RusHolts group of companies is one of the five largest suppliers of automotive products (window washing fluids, wipes, car interior fragrances, etc.) for specialized departments of federal hypermarket chains. We started our business in the 90s with the supply of auto chemicals and auto cosmetics; we represented two global brands on the Russian market: Holts and Redex. After the 1998 default, people stopped buying expensive imported car cosmetics, but the vehicle fleet only grew. Then we decided to create our own full-length line of auto chemicals and auto cosmetics. We have united the products we have created under the umbrella brand Expert. Now private label goods occupy 60–70% of supply turnover, depending on the sales season, and the remaining 30–40% are still produced under our brand.

How we started

Our first partner in the hypermarket business was the Lenta chain. The management team that created this company did not plan to separate the auto products department from the range of household chemicals and household goods. We contacted them ourselves and helped them make a different decision - that’s how our cooperation began in 2001. Today, the automotive goods department at Lenta is one of the most efficient among the non-food goods departments of this chain. The most popular product in auto chemical goods is windshield washer fluids; in winter they account for up to 30–40% of sales volume of the entire range of auto products department.

How they developed

For our company, the key was the transition to creating a wide range of private label products for gas station networks. Private label in retail chains and gas station chains only have the same name, but it works differently. If in hypermarkets private label is an “indicator of low prices,” then private label in gas station networks is an indicator of the network’s customer focus and a “beacon of premium.” Private label for federal gas station networks is a business technology that allows you to organize the assortment at hundreds of stations throughout Russia. This is the only way to ensure that a store at a gas station of the same chain looks the same both in Moscow and in Siberia. Advanced gas station networks strive to achieve a 50% private label share in the food segment and 80% in non-food.

We have been working with gas station networks since 1995, but this type of business began “as an adult” in 1999, after concluding a contract for the supply of the entire non-food range with the gas station network. Having assessed the market and the experience of our Western colleagues, we ourselves began to enter the networks, offering our services as an integrated supplier. We manage supply chains, so we supply the entire range of goods for cafes and stores. Demand for non-food products decreases by 3–6% from year to year due to the rejuvenation of the car fleet - this trend is typical for all markets. Therefore, since 2009, we began to actively deal with food products. In 2015, we created a Russian-roasted coffee blend under the private label of a gas station chain, once again proving that absolutely all goods important for the company can be produced under a private label. Since coffee accounts for every third non-fuel sale, creating it under a private label was very important. So we took it and did it.

What did you learn?

Every manufacturer dreams of getting on the shelves of large hypermarket chains, tempted by sales volumes. But not everyone knows that chains know how to squeeze favorable conditions out of suppliers and prescribe very large penalties for each violation of the contract and supply regulations. You need to understand that chain retail makes money not so much from customers as from suppliers thanks to a system of fines. This is technology.

Fines for failure to fulfill current orders in the amount of 30%, for disruption of promotional deliveries in the amount of 100% of the delivery cost are a common thing. And a sharp change in the ruble exchange rate leads to the supplier breaking the contract. When the exchange rate jumps, it becomes unprofitable for the supplier to supply goods at pre-crisis prices; he wants to freeze supplies, but cannot do this - the network has the right to fine the supplier in the amounts specified in the contract. During a crisis, demand for most goods usually falls, but the supplier has no information about real demand, he only sees orders sent by the network. If a supplier refuses to supply, the network can send orders of any volume and immediately fine the supplier for failure to fulfill these orders. Collecting a fine is very simple - the supplier carries out shipments with a long deferred payment, so the network simply issues fines and immediately reduces its debt to the supplier by the amount of the fines issued. Andrey Sorvachev

General Director of the Russian Canning Company

The Russian canning company has been operating since January 2003, and now we are one of the leaders in the canned fruit and vegetable market. Almost all of Russia's largest chains place production of their private labels with us; we currently produce goods for 13 chain brands (among them Magnit, Auchan, X5).

How we started

The idea of making private labels for retailers arose while working with networks. For example, after our brands (“Retro”, “Dar of the Gods” and “Marinadov” - Note from “Sekret”) appeared on the Magnit shelf, they began to show very good sales. And then the retailer said: “We really like your products, we want to sell them under our own brand.” This was around 2006–2007, when chains still produced limited private label goods.

How they developed

In 2009–2010, we began producing private labels for Dixy, X5 Retail Group, large regional chains (Maria-Ra, Holiday, Chibis and others) and quadrupled the range and share of private label products. At least 80% of retailers contacted us on their own. Now the networks already know a pool of reliable manufacturers, therefore, even when holding tenders, they invite specific suppliers to take part in them. But there are also networks that are just planning to start selling under private label. We track them down ourselves and offer our products.

How much time it takes to conclude a particular agreement depends on the specific network. This usually takes from three to eight months from the date of winning the tender. For each client we develop an individual recipe, composition, price, and sometimes we offer completely new products. For example, our company was the first to offer such a new private label product at Thunder as the ratatouille dish. After successful test sales, other chains introduced it under their own brands.

What did you learn?

The process of bringing your own brand to the market is very costly and lengthy. And networks are interested in private labels, and it is much easier to enter there as their manufacturer. Also, this form of cooperation allows us to ensure maximum production capacity throughout the year, have a predictable turnover, and reduce logistics costs.

There are also disadvantages: the decision to produce private labels is made, as a rule, once a year on a tender basis. Due to the unstable financial situation, the retailer often has to change the volumes and prices that are announced at the time of the tender. For example, due to a drop in customer income, the chain is forced to reduce the volume of product purchases. The manufacturer is also at risk: the cost of goods at the time of the tender is the same, but may increase during the year. The retailer is limited in the ability to increase prices, and we, as a manufacturer, still have delivery obligations. In addition, the majority of our assortment is a seasonal product (produced in summer or autumn). If the volume of orders decreases, we are forced to look for larger warehouse spaces and increase production costs due to storage costs.

The share of private labels is steadily growing from year to year along with trust in chain brands; products are distinguished by affordable prices and stable quality. TMs are losing and will continue to lose in this fight. In my opinion, soon only those trademarks will remain on the shelves that, even before the mass introduction of private labels, have won the loyalty of customers and provide the retailer with significant turnover.

) have long become a tool for retail chains in the fight for customers. At the beginning of 2017, the share of private label goods in certain categories increased by 25%. The share of private labels in the children's goods market is growing rapidly. In particular, according to RBC research, the share of private labels of the Group of Companies "Child's world"(clothing and footwear) already exceeds 70%. Meanwhile, in the last two years there has been a fierce “war” between private labels and branded products for promotions.

The manufacturer benefits from ordering under a private label

Private label products are beneficial for retail chains, he said Andrey Karpov, Chairman of the Board of the Russian Association of Retail Market Experts (RAERR). According to him, the retail chain, when ordering private label products from manufacturers, does not spend money on its promotion or on other costs inherent to the manufacturer. Accordingly, the profit from the sale of such products is higher.

According to Karpov, it is important for the manufacturer to load production at 100%, so orders from private label networks are beneficial to him. At the same time, the manufacturer can simultaneously manufacture products for retail chains, their own brands, as well as for third-party manufacturers.

Brands VS STM

In 2017, a trend emerged when the once-growing private label market gave way to a brand from a manufacturer sold through a promotion, he said Nikolay Moskvitin, senior consultant, consumer panel research department, Gfk Rus. Sales of brands at discounts turned out to be quite strong. This confirms the popularity of mobile applications, with the help of which buyers “hunt” for discounts in different stores.

Nikolay Moskvitin noted the clear leadership in sales of branded products in the canned vegetables category. In particular, at the beginning of 2017, this category grew by 7%. Moreover, the main growth came from branded products at promotional prices. Thus, sales of canned corn from the manufacturer at a promotional price increased by 19%, while sales at a regular price fell. At the same time, private label sales also dropped by 5%. “The reason is the price. For example, canned corn in a private label costs 39 rubles, and branded corn at a discount costs 32 rubles. In this case, the buyer chooses the brand,” he noted.

Reference:

The private label (private label) marketing phenomenon dates back to 1869, when the first Sainsbury’s store opened in London, offering customers bacon labeled with the store’s name. A hundred years later, the French chain Carefour began producing groceries and essential goods without any name. They were cheaper than their analogues.

The history of private labels in Russia goes back about 16 years. Thus, in 2001, for the first time in Russia, Ramstore supermarkets introduced products of their own brand. Later, the Perekrestok retail chain began producing several types of products under the same name brand. Then this trend was supported by Dixie, Lenta, and Pyaterochka.

Demand for private labels is growing - retailers

Retail network "Ribbon" will continue to increase the range of private label goods, as the demand for inexpensive, high-quality goods is constantly growing, the retailer’s press service reported. Today, the retail chain produces more than 2,500 SKUs of food products under the private labels “365 days” and “Lenta”, of which more than 800 were added to the private label portfolio in 2017, as well as more than 2,200 non-food products. The total share of SMT in the company's turnover is at 12%. In 2018, Lenta plans to further expand its range of private labels in various product categories and price segments, the retailer’s press service clarified.

In the briefcase "Ashana" more than 3,300 private label goods that are produced in Russia, she said Nadezhda Paderina, Director of Purchasing Private Label "Auchan" during the NRR-2017. According to her, this figure does not include imports of private label products from other countries. Contracts for the production of private labels have been signed with more than 400 domestic manufacturers. Thus, every fourth product in the customer’s basket is a private label. We are talking about both products in the economy segment of private labels and products in the mid-price segment.

According to Paderina, sales of private labels in the categories of poultry, cakes, pastries, stationery, textiles, and culinary products are growing at Auchan. This is due to the fact that in some categories, for example, “poultry”, “cakes and pastries”, the retailer offered customers more economical packaging and changed the format of products. At the same time, product quality is of paramount value for the retailer, Nadezhda Paderina emphasized.

Roskachestvo researched private labels

Positive reviews about the quality of private label products from retailers do not always correspond to independent research and examination. So, in a pre-New Year study Roskachestvo crab sticks, clostridia, which can cause an eating disorder, were found in private label products of four brands of large chain stores. The violators were crab sticks of private brands: “Red Price” (private brand of the “ Pyaterochka"), "First of all" (STM " Dixie"), Aro (private label Metro), Horeca Select (private brand Metro).

Also, after Roskachestvo’s examination of cottage cheese, it turned out that mold, starch, wheat fiber, as well as antibiotic residues were found in the products of the Krasnaya Tsena trademark (private brand of the Pyaterochka chain). Note that this was the only STM representative for the “cottage cheese” position in this study.

According to Andrey Karpov, in Russia the pricing policy for private label products is, as a rule, lower than the analogues of the manufacturer’s products, while there are questions about the quality of the goods. “This is how Russian private labels differ from European ones. There, private labels compete not only and not so much in cost, but in quality. And a European is ready to buy a private label product at a higher price, because this is a guarantee of the quality of the network,” said Karpov. Please note that private label products are divided into classes. In particular, private labels are produced in the economy segment, the mid-price range, and also the premium class.