Globally, store brands in Europe have the world’s highest market penetration levels. By 2015, the share of supermarket store brand products is estimated to reach 40 percent of all EU food retail sales. Store brands are often popular because they are relatively cheap. Unfortunately, we know that the race to provide the cheapest price often means inadequate attention is paid to responsible production in primary producer countries. Suppliers can suffer a variety of pressures and abusive practices, which compromise their labour and social rights. For example, low wages, forced overtime, and employment insecurity are all present in store brand supply chains. The biggest store brand retailers in Europe are Aldi, Schwartz Group's Lidl, Tesco and Edeka. The market share of store brands is correlated to the concentration level in (food) retail and has been identified as a key driver in price competition between retailer chains.
In this section of the website you will find detailed information on selected supply chains in the retail sector with special attention devoted to store brand production. All entries to this website are based on original field research undertaken by our partners in the scope of the SUPPLY CHA!NGE project. Below we provide more introductory information on the role of private label production in today’s food retail.
Store Brand products as a retail strategy:
A retail chain’s store brand products are those products bearing the store’s own brand. Sometimes, they are also referred to as ‘own brand’ or ‘private label’ products. Well known store brands in European supermarkets include Euro Shopper, X-tra, Co-op, Gut und Günstig and First Price. Store brand products can be produced in facilities owned by another company,that may be used simultaneously for the production of other store brand or special label products.
Store brand products can be sold at a lower price, because stores do not need to promote them separately, which means their marketing costs are minimal. Also, they always have a ready distribution channel, which means that they are guaranteed a visible place on store shelves.
When they were first introduced, store brand products were mostly basic goods, with simple packaging, that promoted themselves as being cheaper, but of a lower standard. Now, however, they are offered also in premium versions. Retailers sell store brand products with the objectives of increasing customer loyalty, strengthening and setting apart the chain brand, distinguishing themselves from competitors, improving their market position and increasing retail earnings. Store brand products are especially strong contenders in product groups where there are few obvious differences between products, for example flour, sugar, or tinned vegetables.
The role of international joint procurement alliances in the procurement of store brand products:
It is a common feature of the daily consumer goods trade to form chains, and there is also a trend towards strong centralization of procurement and logistics operations. In general, it is common in Europe for purchasers to be more centralized than producers and distributors. Important bulk purchasers in Europe are AMS; CO-OP; UNITED NORDIC and EMD.
Expanding international joint procurement, which adds to the buyer power held by retail stores, and facilitates abusive business practices, has further weakened the position of those producers that were already vulnerable, especially in developing countries.
Price competition between branded products and store brands, as well as between different retailers, is often carried out with no regard neither for the lives of the workers in producing countries, or for the environment.