New The Private Label Dilemma presentations/12-06_3rd... · 2015. 4. 15. · Rabobank The world’s food and agribusiness bank Focused on global food and agribusiness (“F&A”)

The Private Label Dilemma

Dual Tracking – Walking the Tightrope

Sebastiaan Schreijen

Gothenburg June 2013

Rabobank

The world’s food and agribusiness bank

Focused on global food and agribusiness (“F&A”)

• Over 100 years of banking history rooted in F&A sector

• 1,300 public and private F&A corporate clients globally

• Proprietary, best-in-class Food and Agribusiness Research (“FAR”)

• Expertise in providing banking services to farmers, food processors

and traders

• Leading Food & Agribusiness lender

Strong worldwide network

• Presence in 45 countries

• 59,000 employees globally

One of the world’s safest and most stable banks

• Safest privately owned bank in the world (Global Finance, Aug ‘12)

• 27th-largest bank worldwide by total assets (Global Finance, Aug ‘12)

• US$946.6 billion in assets (December 2011)

Privately held and independent

• Founded in 1898 and headquartered in Utrecht, The Netherlands

• Organized as a cooperative

Rabobank International June 2013

RABOBANK GROUP

Rabobank Nederland Rabobank International

Dutch local member banks

Asset

management

Mortgage

Leasing

Commercial real

estate

Insurance

International retail

banking

Wholesale banking

Corporates

Corporate

Banking

Global Financial

Markets

Top 50 World Banks

August 2012

World’s Safest Banks

August 2012

F & A research

M & A

Food & Agribusiness Research and Advisory

Global network, local F&A expertise


Today’s Agenda

1. Introduction

2. Our outlook for private label

3. Successful suppliers’ strategies

4. Dual tracking – the dangerous attraction of private label

5. Conclusions


Private label seen growing to 50% by 2025

11 growth drivers:

• Consumer acceptance

• Food retail consolidation

• Inroad of modern retail

• Growing hard discount

• Hard discount competition

• Need for diversification

• Comprehensive PL strategies

• Raised supply professionalism

• Consolidation A-brands

• Price competition in PL

• Growth online retail


Source: PLMA, Nielsen, Euromonitor, IGD, Rabobank, 2013

Fr 04

Fr 11 Fr 15

Ger 04 Ger 11

Ger 15

It 04

It 11

It 15

NL 04

NL 11 NL 15

Sp 04

Sp 11

Sp 15

Sw 04

Sw 15 Sw 11

UK 04

UK 11 UK 15

WE 04

WE 11 WE 15

2025

Rus 04

Rus 11

Rus 15

CEE 04

CEE 11 CEE 15

Tur 04

Tur 11

Tur 15

Pol 04

Pol 11

Pol 15

0

10

20

30

40

50

60

10 20 30 40 50 60 70 80 90

Top-3 + HD penetration rate (in %)

Pri

vate

lab

el p

enet

rati

on

ra

te (

in %

)

Depending on “emotions”


Source: Rabobank, 2013

<10% Cola/beer/spirits

Baby/pet food Confectionery

(Insecticides)

>60% Chilled food

Spreads Dairy products

(Kitchen Towels)

Pri

vate

lab

el p

enet

rati

on

Marketing Functional ingredients

Health Indulgence

Value for money Generic

Fresh supply ‘need-to-have’

B-brands squeezed out of the market


Source: Euromonitor, Rabobank, 2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2025

Value PL & HD

Mainstream PL

Premium PL

B-brand

A-brand

Super premium

Rise of hybrid consumer is causing …

Adept or fade away

• The need to distinguish

• Shifting distribution channels

• A different marketing approach: behavioral segmentation

• Brand erosion by perception



8,2%

9,2%

-1,5% -0,6%

5,9%

7,0%

-2%

0%

2%

4%

6%

8%

10%

12%

Premium WE Premium USA

Mid market WE

Mid market USA

Value WE Value USA

… snacks shows slightly different pattern



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2025

Private label

B-brands

A-brands

Premium brands

Action required!



Relative cost advantage

Perc

eive

d v

alu

e

Niche brands Premium PL

A-brands

Mainstream Private Label

B-brands

? ?

The quest for specialisation



The crisp/chips market 2013


Source: Amadeus, annual reports, Rabobank, 2013

Perc

eive

d v

alu

e (E

BIT

ma

rgin

)

Relative cost advantage (asset turn)

Today’s Agenda

1. Introduction




5. Conclusions


Picking the right strategy



Relative cost advantage

Perc

eive

d v

alu

e

Niche brands Premium PL

A-brands

Mainstream Private Label

B-brands

? ?

Market position determines strategic options



Successful suppliers’ strategies



Carve out a niche Consumer loyalty

Headache reduction

Cost leadership

The devil is in the detail


OR ≠ AND

Today’s Agenda

1. Introduction




5. Conclusions


Two distinctly different business models


Dual tracking does not seem to be paying off


Source: Amadeus, Company data, Bloomberg, Rabobank, 2013

0

2

4

6

8

10

12

14

1 2 3 4 5

EB

IT m

arg

in,

%

Asset turn, times

A

B

Dual track

PL

10% ROCE

20% ROCE

30% ROCE

But it is all in the execution


Source: Amadeus, Company data, Bloomberg, Rabobank, 2013

0

2

4

6

8

10

12

14

1 2 3 4 5

EB

IT m

arg

in,

%

Asset turn, times

A

B

Dual track

PL

10% ROCE

20% ROCE

30% ROCE

Dual tracking strategies that may work:

I. Category Management

Value add:

• Maximise shelf returns

• Lower reputational risks (retailer)

• Market entry

• Launch new products

Required:

• Consumer knowledge

• Different price points


EUR 2,00

EUR 1,65

EUR 1,15

EUR 0,95

EUR 0,65

EUR 0,55

Headache reduction


II. Defensive


Last line of defence

Value add:

• Category control

• Relationship management

• Maintain production volumes

Required:

• Cost leadership

• Capacity constraints industry

• Very strong brand


III. Opportunistic


Value add:

• Maintain production utilisation

Required:

• No objection to P&L volatility

• Private label not part of budgetting

• Cost leadership

(Down) time = money


IV. Firewalls


Value add:

• Economies of scale in production

• Economies of scale in sourcing

• Broader base for innovation

Required:

• Strict separation sales teams and production

• Integral cost price accounting

• Cost leadership

• Autonomy in recipes

Best of both worlds – in two worlds

Dual tracking – walking the tightrope


A case of dual tracking losing balance


Source: Bloomberg, Company data, Rabobank, 2013

Risking acceleration of B-brand erosion

Different sets of information flow may skew the information asymmetry between

supplier and food retailer.

• Congruence of price

• Congruence of quality

• Congruence of innovation

• Congruence of accounting


Today’s Agenda

1. Introduction




5. Conclusions


The private label dilemma

1. YOU MAY BE TEMPTED BY OPPORTUNITIES IN PRIVATE LABEL

2. BUT YOU WILL RISK SERIOUSLY UNDERMINING YOUR BRAND

3. IF YOUR PRIVATE LABEL STRATEGY IS NOT EXECUTED TO PERFECTION

And above all

4. DON’T MAKE THE RETAILERS ANY WISER THAN THEY ARE ALREADY


… any questions?


Documents

New The Private Label Dilemma presentations/12-06_3rd... · 2015. 4. 15. · Rabobank The world’s food and agribusiness bank Focused on global food and agribusiness (“F&A”)