November 29, 2018

Coop Italia brings own-label dolce vita to Germany

Italian ice cream seller (photo: Scusi/Fotolia)
Eat me, I'm Italian
Retailers have been peddling own label for nearly a century now. One relatively new variant is to export it onto the shelves of foreign grocers. Waitrose was one of the first to do so in 1999 with the sale of premium own label to ParknShop in Hong Kong. The UK multiple now exports to more than 50 countries. Swiss giant Migros also markets its 'Café Royal', 'Frey-Schokolade' and 'Orange Garten' brands internationally.

What was once seen as an exotic niche is growing in popularity as more and more retailers discover export as an additional revenue stream. The great beauty of this, of course, is not competing with oneself on one's home market.

A recent, but formidable player to join this band of merry own label exporters is Coop Italia. The Bologna-based consumer cooperative created a special division for the purpose in 2015, Coop Italian Food. After having obtained listings in around a dozen countries worldwide, Anna Verga, Head of Global Business, is now trying to crack the German market. Will the lady be successful?

We also asked own label guru and Private Label Manufacturers Association (PLMA) president Brian Sharoff for his take on the subject...

Park and Shop, Hong Kong (photo: Coop Italia)
Coop Italia own label at ParknShop in Hong Kong
Over the last three years, Coop Italia has gained listings at a dozen retailers including AB Vassilopoulos, Ahold Delhaize USA, Biedronka (Poland), Coop Bulgaria, Coop Estonia, Coop Czech Republic, Coop Japan, E. Leclerc (France), icoop (Korea), ParknShop (Hong Kong), Schnucks (USA) and VIP (China).

These deals cover both classic own label (AB Vassilopoulos, E. Leclerc) and exclusive dedicated label agreements without the Coop logo (e.g. the 'fiorfiore Prodotti d'Italia' range at Ahold Delhaize USA). They provide customers with authentic Italian food, such as olives, pasta, bruschetta, cooking oils, pastry or grissini, "at own-label prices".

Many of these arrangements were made via Coop Italia's membership of international buying group Coopernic as well as via Eurocoop, a cosmopolitan grouping of national cooperatives. But there are limitations even within such retailer alliances. German Coopernic member Rewe, for instance, already has a buying office of its own in Italy.

Leading German retailer Edeka presumably has little interest because it already markets Italian products via the 'Creazioni d'Italia' range developed within its own European buying alliance, Agecore.

Anna Verga is therefore beginning with "small German retailers, gourmet chains or organic specialized chains and distributors who are interested in developing a full range of authentic, high-quality Italian food products".

Here Coop Italia can rely on a 70-year tradition in own label. Italy's largest retailer by sales currently offers around 4,500 own label lines, drawn from 500-odd local suppliers. Annual own label revenues account for about €3.6bn or more than a quarter of total net sales (€13.4bn) in 2017.

The cooperative, whose store base includes 113 hypermarkets/superstores and 1,039 supermarkets, is also strong in organic own label. Its 'Vivi verde' range already numbers around 620 food and 110 non-food lines.


"It's an intriguing idea"


Brian Sharoff, CEO PLMA (photo: PLMA)
PLMA president Brian Sharoff
Mr Sharoff, why are ever more retailers selling their own label to retailers outside their own country, and where are the natural limits to this growing phenomenon?

It's certainly an intriguing idea. It probably has its greatest potential in Europe where more than a dozen countries exist in relatively close proximity, but are highly differentiated by language, culture and cuisine. Since each country has created successful national supermarket chains, one can see a day when private label in one market is offered to consumers in other markets. E-commerce could facilitate the process, too.

The situation in the US is quite different since upmarket retailers, like Trader Joe's, already exist from coast-to-coast. Aside from food products from Italy, I'm not sure that any other country's private label would have a large audience. As for Asia, it's likely that European private label could be successful, but the market penetration of private label in China, Japan, Korea and other Asian markets may be a limiting factor.

Presumably the main reason for exporting own label is the fuller utilisation of either one's own label production capacity or that of one's own label suppliers?
It's hard to say whether the increasing use of production lines is a major factor at this point since successful export would sooner or later require adjustments in taste, performance, packaging, and labelling, which in turn drive cost.

How big is the danger some of this own label capacity will end up on the grey market?
This has always been a concern of retailers, especially when exporting to Asia where intellectual property laws are lax. The grey market problem characterized this kind of strategy back in the 1960's and 1970's when, for example, Kroger sold its 'Captain Cook' private label in Daiei stores in Japan. It could not control distribution or promotion.

Coop Italia own label at Leclerc (photo: Coop Italia)
Coop Italia own label on the shelves of a Leclerc store in France
Coop Italia sells own label to other retailers or offers exclusive dedicated brands to, for instance, Ahold Delhaize USA. Are there any advantages or disadvantages to the two approaches?

I think that in both cases what we are seeing is this Italian retailer taking on the role normally provided by the manufacturer as a supplier of private label. Eventually, there are only so many ways to split the profits, and manufacturers may become hesitant to participate.

Coop Italia has concluded numerous international own-label agreements via its membership in the European buying group Coopernic. To what extent is the renewed emergence of such purchasing alliances stimulating this kind of deal?
The proliferation of buying groups could have this effect, but at some point the laws of profitability will come into play.

Rewe is also a member of Coopernic, but already has a buying office in Italy, thus reducing the need for an Italian partner. Is the export of own label more likely to succeed with smaller retail customers?

The size of a potential retail customer is an obvious drawback since it is not that difficult to create one's own brand of Italian foods, for example, and to avoid working with another retailer entirely. In most cases, the name of the other retailer is not so well-known that it would matter.

Food Lion USA (photo: Coop Italia)
Part of Coop Italia's 'fiorfiore Prodotti d'Italia' exclusive dedicated brand offer on display in a Food Lion store in the US
Coop Italia is marketing Italian produce, which has international repute. German products are renowned for their quality, but are not generally regarded as 'sexy'. Should German retailers simply leave this segment to their Italian and French counterparts?

I don't believe that the publicity surrounding the export of Italian private label has reached a point where retailers and manufacturers in other countries should change their strategies. There may be opportunities down the road for German, Polish, British or Spanish food.

Presumably 'authentic national cuisine' is best suited for export? Or are other product categories suitable for the purpose?

Yes, authentic food products are obvious, but so are non-food categories such as houseware and kitchenware, which are based on performance rather than taste. Retailers interested in exporting their private label need to examine what they sell now at home and what might be marketed in other countries.


Read in German
: "Coop Italia will nach Deutschland exportieren" and "Eine ganz hübsche Idee" by Mike Dawson on page 12 of Lebensmittel Zeitung, no. 48, 30.11.2018


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