About Me

John Fahy is the Professor of Marketing in the University of Limerick and Adjunct Professor of Marketing at the University of Adelaide. He is an award winning author and speaker on marketing issues around the world.

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Entries in Retailing (2)


Will the Growth of Private Label Spell the End for Manufacturer's Brands?

Recent evidence suggests that the penetration of private label in the grocery sector in Ireland is growing and that we are finally catching up with some of our European counterparts. Estimated to be at about 22 per cent of the market which puts us up there with the likes of Denmark and the Netherlands, it is still well behind global leaders like the UK and Switzerland at around 45 per cent. What is causing this rise in private label and does it inevitably spell the end of manufacturer brands?




The first part of the question is easy to answer. The downturn in the economy has forced many shoppers to be more price-sensitive and to question the premium attached to a manufacturer’s brand. So a shopper buying milk, for example, is likely to see little added value in the branded product and choose the usually cheaper private label instead. But the move to retailers that carry primarily private labels such as Lidl and Aldi is also a big factor. These chains now account for almost 14 percent of the Irish grocery market and predominantly carry their own-branded products.


Whether these changes herald the demise of well-known brands will largely be down to decisions made more by manufacturers and retailers rather than consumers. The success of private label varies massively by product category. In the grocery sector it has taken up to 50 per cent of categories like aluminium foil, refuse bags, milk and ready meals. In the home improvement/DIY sector own brands like B&Q and HomeBase dominate. But in other categories, the impact has been negligible. In the beer, toothpaste and baby food categories, own-labels account for under 3 per cent of sales and they have made almost no impact on the cosmetics sector. As long as manufacturers continue to invest in their brands and maintain powerful emotional connections with their customers, they will be able to meet the challenge posed by retailers. For example, it is almost 20 years since the likes of Sainsburys and Dunnes Stores introduced their own-brand colas, but Coca Cola continues to dominate the category. Similarly, the market share taken by own-brand yoghurt in the UK fell from 21 per cent to 5 per cent between 2001 and 2005.


But retailers have also learned from their mistakes. The change in vocabulary from private label to own-brand is insightful. Whereas, private label suggests cheaper alternatives, own brands like Tesco Finest, Organics and Healthy Living are all brands in their own right. If retailers simply market cheap versions of brands, they force manufacturers to respond with their own low-price offering which has the net effect of commoditising the category and reducing margins for both players. Sales of private label products in Sainsbury’s in the UK rose to over 50 per cent but it continued to lag far behind Tesco in overall market share terms with the result that it has tried to raise the profile of its brands by partnering with the likes of Jamie Oliver. Forcing manufacturers out of business is not in a retailer’s interest either as healthy competition on the supply side improves innovation which benefits them. Consequently retailers have become much more sophisticated at building their own brands and at exploiting gaps in the market left by manufacturers – witness for example, the slick packaging on the Tesco Finest range.


What has simply happened is that the battle for mindshare has a powerful new player – the retailer, who in many cases is armed with better consumer information than manufacturers. As the old cliché goes, the more things change, the more they stay the same.


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The Superquinn Legacy


The Superquinn Legacy

The recent announcement by the Musgrave Group that it would be rebranding its Superquinn shops as SuperValu from February 2014 led to some disquiet among loyal Superquinn customers as well as concerns for the 102 staff most likely to be directly affected by the decision. But equally important are the lessons to be learned from the rise and fall of the supermarket brand founded in 1960 by one of Ireland’s leading retailers, Fergal Quinn.



When Quinn opened his first store in Dundalk, the Irish grocery sector was a competitive place dominated by large chains such as the price leader Dunnes Stores, Quinnsworth, and HWilliams. That Quinn’s nascent operation not only survived but grew strongly in this environment was testimony to the clarity of his strategy for the business and the success with which it was implemented. As the chain began to grow with new shops in Dublin, it became clear that it was targeting the more discerning, high-end grocery shopper with innovative product options such as fresh bread, in-store meat counters, deli sections and so on. The strategy was also strongly ‘outside-in’ – customers were consulted regularly for new ideas through the use of consumer panels and many of the chain’s best innovations came directly from its shoppers. And customer service became the hallmark of the business reflected by the founder’s very visible presence on the shop floor as well as an industry-high staff-to-store ratio.


At the height of its powers, the chain had an estimated 9 percent of the Irish market – a very creditable performance for a premium brand. Many commentators have been suggesting in the past couple of weeks that it was Quinn’s decision to cash out when he sold the company to the Select Retail Holdings property group for €420m in 2005 that spelled the beginning of the end for the business. But in truth, it was in trouble long before that. The five years running up to 2005 were the height of the Irish economic boom. This should have been a golden spell for the premium grocer but instead its market share was falling. Simon Burke was hired from Hamley’s by SRH to restore the brand’s reputation but he couldn’t do it. It was this inexorable slide in brand equity that made Musgrave’s decision to rebrand a rather easy one.


Superquinn has been dying slowly for the past 20 years. If a company cannot continue to successfully implement its existing strategy because of changes in competitive or economic circumstances and it cannot change to a new strategy, time will inevitably catch up with it. Changes in ownership or leadership rarely make much difference if this fundamental question is not answered. SRH learned a hard lesson when they offloaded the business to Musgraves for €229m only six years after purchasing it. During his business career, Fergal Quinn has extoled the importance of customers more than most CEOs. Sadly for brand he created, they have been voting with their feet for some time!


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