Private Labels In EU
Euromonitor International, a major player in market analysis and data collection, has a very nice section on podcasts to which I often listen. They recently had an interesting podcast on private labels in Eastern Europe (see here http://euromonitor.libsyn.com/private-label-in-eastern-europe). In a few words, while private labels penetration in Eastern Europe is still way below the Western Europe average (the most developed private label market Czechia has 12 % from total turnover with private labels, while average for Western Europe is 16 %), the trend is towards rising private labels penetration, especially in areas like homecare, foods, etc. The podcast also discusses how established brands are fighting this trend via promotions, more aggressive advertising, etc. There is no discussion, however, of the reasons for this development from a branding point of view.
On one hand, most Eastern European markets are very price sensitive, the extreme examples being markets like Hungary and Romania. This means that private labels, being normally cheaper, have a good chance there. On the other hand, many “normal” brands which are established in the West are virtually unknown in the East and will have to invest a lot to promote their products. For example, not many people know the cheeses of Bel Fromageries in Romania or Bulgaria as more local products are consumed. And we come here to the question in investing trust in brands. Eastern European consumers for historical reasons are more distrustful to promises, including brand ones. There is that “they only want to cheat me” feeling in many consumers. People select carefully whom to trust and where to spend their money. And, as the big retailers like Metro, Billa, Carrefour, IKEA, etc. were one of the first to risk and invest in Eastern Europe, they have accumulated a significant amount of goodwill with consumers. This is why I believe that this trust can be easily transferred to private label products by these retailers. This could be easier where generic products like food, homecare, etc. are concerned and more difficult in others, but there is no reason to doubt that by 2020 the levels of private level penetration in Eastern Europe will be equal or even higher than those in Western Europe.
