The battle for brands

More and more retailers in the pet industry are negotiating the way between private label and e-commerce to bind costumers to them.

Private label gaining ground

As we discovered earlier in this section, the Private Label Manufacturers Association found that private label continues to grow across Europe. Amongst the highest penetration of private label is the UK with 46% and this is forecast to grow in the future as supermarkets battle with discounters in that market. It will undoubtedly grow further in the pet food category as Aldi have recently announced their entry into pet foods in the UK. 

In France, private label continues to make progress, despite the efforts of A-brands to stop it, and now accounts for 35% in volume terms. In Germany, private label has stayed over 40% for eight years as it has too in Austria. Switzerland is probably the most private label-minded market with a share of over 50% for a decade. In the Scandinavian area, private label is not as important but is nevertheless around 30%, which is similar to the central European markets. In central Europe, however, growth has been even more dramatic with private label accounting for 29% in Poland, up from under 8% just twelve years ago!

Advantages of private label

Store brands enable the retailer to generate higher margins than he gets from brands, whilst delivering similar quality to the consumer. The retailer’s brand name is often better known and respected than many other brands and thus gives reassurance to the consumer about the quality of the products.

Another key rationale is the ability to differentiate the store brand from competitors and ensure consumers stay loyal to the retailer. This is clearly most effective where the store’s brand is seen to be a brand similar or indeed better than the A-brands.

Some examples

In the pet trade, big retailers like Fressnapf/Maxi Zoo have driven private label to high levels where the store brands are marketed like A-brands, are innovative and benefit from preferred space in store.Pets at Home in the UK, with over 400 outlets, has seen a growing focus on private label over the past years in the run up to their IPO. Here private label is over 70% of their business. Musti ja Mirri in Finland combines private label with exclusivity from many brands to take the share of the business even higher.

Why such a focus?

Pet retailers are in an extremely competitive environment where they need to build and retain loyalty to their brand as they compete with grocery stores and the fast growing world of e-commerce. Online sales are growing fast everywhere. Internet based sales are being driven by e-commerce companies such as Amazon, who sell an enormous range of products. But they are not alone, as pet specialist online retailers like Zooplus, Wanimo and other more local retailers, are innovating and expanding and growing their business. 

Online pet sales are estimated at 5.3% globally, according to Fung Global Retail and Technology, with the US (7%), the UK (9.4%) and Europe (6.5%) ahead of this trend. In the US, in the first three months of 2016, over 50% of online sales were through the specialist pet food shop Chewy.com and a further 34% via Amazon. Specialist brands dominate the sales on these portals with Blue Buffalo and Wellness the top two, followed by Hill’s, Purina and Royal Canin. 

Omnichannel 

The big retailers are focusing on omnichannel strategies where consumers can buy in stores, by phone or online and either have a home delivery or store collection system to distribute the goods. This system appeals as it offers flexibility to the consumer to buy how he wants, when he wants and also to decide how to obtain the products ordered. For the retailer it promises to retain the loyalty of the customer and enable the business to offer more than pure play online retailers can and to ensure the profitability of bricks and mortar.

Keeping close to pet owners

Both the growth of online retail and the developments in private label have as their key goal the need to develop the knowledge of the consumer and build stronger relationships with them. That way, brands and retailers (be it private label products or retailers on and offline) can develop that closeness and the trust of consumers to enable them to grow their business and keep the customer happy and loyal.