Mainstream appeal

Gone are the days when going natural or organic was a trendy way to consume for the upwardly mobile. Now, organic and natural food and beverages, cosmetics and household products are almost as prevalent on store shelves as any other products. The private label market, never one to miss out on the latest trends, has jumped onto the bandwagon in recent years and is showing strong growth in the sector.

EUROPE STRONG IN ORGANIC PL

When it comes to the organic private label sector, Europe is showing itself to be a strong competitor —with current annual growth rates of 7 to 8 per cent. The global trade of organic products is expected to reach US$100 billion by 2015, and markets are continuing to grow based on consumer demand, says Laura Batcha, executive director of the Brattleboro, Vermont-based Organic Trade Association.

A recent equivalence agreement between the United States and Europe has further helped streamline trade between the two markets. Signed in September 2012, the agreement means that the standards of quality upheld in the respective U.S. and EU markets must also be honoured in foreign markets. Thus, neither market is obligated to recertify products, which is bound to ensure an easier flow of trade, according to Batcha.

“This [agreement] is potentially interesting in terms of product management and assessment,” she says. “We’re already beginning to see an increase in trade as a result.”

Batcha expects Europe’s strong rates of growth to hold, with Germany remaining at the top of the field. In 2012, Germany continued to be the largest market for organic products in Europe, with a turnover of EUR 7.04 billion — a growth rate of 7.2 per cent. France is continuing to make headway in the sector and has become Europe’s second-largest organic market, with sales expected to rise to more than USD $5.1 billion in 2014 and USD $7.8 billion in 2016, according to the Organic Trade Association.

According to Jacques Dupre, senior insight director at Information Resources Inc. in France, organic private label made real progress this year with 13 per cent growth, compared to the national brands, which increased by only 2 per cent. Finland, Norway and the Netherlands are also showing strong progress, with 15 to 20 per cent growth in the last year.

As for some of Europe’s top private labels, Austria’s Ja! Natürlich organic label continues to succeed, with a market share at 6 per cent, notes Planet Retail. In the UK, So Organic and Tesco brands remain top labels, as well as Rewe International — especially in Italy.

With so much interest in the private label natural and organic sector in Europe, it’s no surprise that the price gap between competitors is narrowing — in every European country except Germany. Because of the increase in new private label products, consumers are no longer buying based on price alone. Now, they’re increasingly weighing quality against price in order to find the best value for their money. As a result, private label retailers have had to optimize their product assortments in order to entice customers, notes the Organic Trade Association.

“It’s nice to have organic products, but it’s nothing special these days,” says Hermann Sievers, the German partner at International Private Label Consult.

Sievers says that every retailer in Western Europe has an assortment of 150 to 200 organic SKUs.

“In order to further growth, private label organic products have to add particular value, such as locally grown or Fairtrade aspects,” he says, adding that retailers have also taken to aiming towards new or overlooked products and categories to gain customer loyalty.

EYE ON TRENDS

On the private label side, retailers are increasingly looking towards staple items such as tea and chocolate, which tend to have a high level of brand fidelity. Batcha says that there has been no significant change in consumption of these products on the part of the consumer, but demand is so high for staple items that private label brands are hoping to finally profit from such a consistent category in terms of growth.

Another area seeing growth is the frozen food and ready-made category. As the pace of everyday life speeds up around the globe, consumers are increasingly demanding quality organic meals that can be popped into the microwave or oven and enjoyed quickly, according to the Organic Trade Association and spokespersons from Coop Naturaplan and Migros.

Swiss private label Migros (headquartered in Zurich), which saw 9 per cent overall growth in its organic market this past year, has expanded its ready-made organic product category. Besides its current classic organic assortment of vegetables, fruit, meat and dairy products, “the [Migros] Bio range is expanding in the convenience products sector, [such as] ready-made pasta products, ready-made sauces, frozen vegetables and fruits,” says Christine Gaillet, spokesperson for Migros.

Migros’ top in-country competitor, Basel-based Coop, is also working to supply the growing demand for healthful pre-cooked items under its organic Naturaplan label.

“More and more, people are asking for ready-made meals that are fast, delicious and made with healthy and environmentally friendly ingredients,” says Ramon Gander, Coop spokesperson.

In fact, health is just one of the reasons natural and organic products are doing so well within private label brands. Prepared fresh fruit and vegetables, for example, have seen high rates of growth in the sector, especially pre-made vegetable salads. Stores are jumping on the health food bandwagon by winnowing checkout areas and replacing junk food with good-for-you snacks, Sievers notes.

Discounter Lidl, headquartered in Neckarsulm, Germany, removed sweets from the checkouts of every one of its 600 UK-based stores (not including Northern Ireland). Now instead of chocolate bars, customers will find dried and fresh fruit, oatcakes and juice. The decision, Lidl notes, follows the retailer’s introduction of healthy snack options for kids at checkout counters in the Netherlands and Belgium, which has been in place for some time under its “On the Way to Tomorrow” initiative.

In France, several retailers are looking to make health and sustainability a priority within private label. Boulogne-Billancourt-based Carrefour says it favours local sourcing for its fruits and vegetables, in an effort to limit its environmental footprint; while Intermarche, Bondoufle, is reported to be currently developing its “100% Origine France” offer, starting with fruits and vegetables.

This push towards locally grown or Fairtrade items is, according to Sievers, also another top trend in the private label organic market.

“Customers are asking themselves, ‘What kind of product can I trust?’” says Sievers.

One category that is seeing some of the strongest growth and innovation is in alternative grains and gluten-free items.

“Gluten-free products are becoming popular, even for those not needing to use them for dietary reasons,” Batcha says.

Swiss retailer Coop says its “Free From” products showed a turnover of CHF 17 million in 2012 — translating to a 15 per cent increase from the previous year. Coop currently offers around 40 products without gluten.

Fellow Swiss retailer Migros has continued to develop its Aha! allergy-free label, which carry a seal from the Swiss Allergy Centre and include mostly gluten- and lactose-free items. Since 2011, Migros has boasted its own production line for gluten-free bread, noodles and bakery items.

While food remains the top category within organic private label, non-food items such as household items and cosmetics are slowly gaining ground. Germany leads the organic cosmetics field in Europe, with a market share for private label brands at 27 per cent in the year 2013, Elfriede Dambacher, a Germany-based consultant for the organic cosmetics industry, says.

Consumers are looking for non-food products they can really trust.

“We’re seeing the most market growth in skincare products,” says Dambacher. “What you put on your skin is very important, and consumers trust organic cosmetics. They are staying loyal to these products.”

Discounter Lidl launched its own private label organic cosmetics line in all of Europe, but Dambacher says each country has its own special needs.

“Italians are looking for hair care products, while in France, people want good-smelling, quality creams.”