PRIVATE LABELS

Their relevance to the pet market.

Private labels seems to have different definitions. I've met manufacturers who define them as "everything other than my own brands", whereas others restrict it to brands belonging to retailers with contolled distribution. Everything in between these two appears to be valid as well.

Over the last 10 years private labels – in this case being defined as brands owned and controlled by retail – have taken (sometimes significant) shares of market, primarily to the detriment of local manufacturers' brands; certainly in the dog and catfood arena. And these shares continue to grow. As an example I can mention the development in grocery in Spain, where private labels represented around 5% of market-value 10 years ago – for dog and catfoods - whereas the figures for 2003 show that around 36% of market-value was represented by retail-owned brands.

Another example is Ol'Roy, the WalMart brand, which now takes 3rd place in the massive US market.

What drives this development?

To a great extent the development of retail itself. International consolidation and expansion leads to increasingly powerful retail-chains that have a vested interest in developing their own brand and its image. And petfoods fit perfectly well in this strategy. Because there are very strong manufacturers' brands that serve as the benchmark. And furthermore, petfoods are high-interest products for pet-owning consumers.

This probably explains why slower moving non-food items are still predominantly sold under manufacturers' brands.

Private labels are in essence the domaine of grocery retailers. Because of their widespread presence and the sheer number of end-buyers they serve. Specialty does not yet have those powerblocks and is therefore much less in a position to effectively deal with private labels. Of course you can occasionally see the odd "chain" of 10 shops in which one sees private labels, but the decision to go this route is more based on a strongly developed ego of the owners of the "chain" than on business relevance.

If private labels have grown exponentially in the last decade, is there an end to its growth?

Although one can never be in a position to forecast consumer-behavior over a very long period, I do believe that for petfoods continued growth will be shown, albeit that the growth-curve will flatten significantly.

For non-food items strong growth can be forecasted to the extent that it is expected that proper specialty chains will emerge and further develop and that it will be in the interest of these chains to enhance its specialist image by selling private labels.

Additional information