Tue. Oct 22nd, 2019

«A new manufacturer product only manages to enter 25% of supermarkets»


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Manufacturer brands continue to lose presence in supermarkets and as a result, Investment in innovation in consumer products has plummeted 32% since 2010. From Promarca, the employer of the first high consumption companies, they defend that they are the engine of the sector due to their high contribution to GDP – with a weight of 7.4% -, the generation of more than one million jobs annually and for representing more than 80% of the investment in R&D of the sector. In this sense, the president of Promarca, Ignacio Larracoechea, appeals to the big chains that "have expelled the brands of their linear manufacturers" so that, among other issues, the number of innovations that are launched at market.

Is the economic crisis to blame for the rise of the white label in our country?

For us the crisis is a part of the explanation, but there are three more causes. The first one is that some chains have expelled the brands from their linear -as Mercadona did in 2008. On the other hand, the big problem in this sector is that innovations do not get an adequate distribution: a manufacturer launches a product and It only manages to enter approximately 25% of the stores, that is, in one of every four supermarkets. However, there are some who do very well as Carrefour, El Corte Inglés, Alcampo, Eroski and the regionals; but we have three great players that don't put the innovations of the brands: Mercadona, Lidl and Aldi. For its part, Dia in the last year has introduced 46% of the references, it is a fact that is fine.

We do not intend to include all the innovations, the distributor is free to choose, but being so important the innovation for the development of the categories and for the growth of the GDP, systematically denying the entry of the innovations in the linear ones is a damage for GDP and for employment.

«There are some who do very well as Carrefour, El Corte Inglés, Alcampo, Eroski and the regionals»

What is the third cause of the loss of brand presence and the collapse of innovation?

Another circumstance that does a lot of damage is "copycat packaging", which translates from English as the practice of copying disloyal packaging. The white or distribution brands copy the manufacturer's brands quite frequently, we have performed an analysis on the subject that we will publish when it is finished. This is a frequent practice that does a lot of damage since the manufacturer considers that if you have to spend a lot of money to innovate and in the end, you only enter 25% of the stores and copy it over, because the incentive to the innovation. This is a problem that occurs in greater proportion in Spain than in other European countries.

But, there are brands of manufacturers that are behind the development of white marks …

The manufacturer sometimes needs to produce white marks to be able to produce large quantities and thus offer a cheap cost derived from large runs and economies of scale. On the other hand, it is often imposed as a condition by the distributor, who pushes him to make the white mark if he wants to have a presence in his line. In addition, sometimes it happens that you buy a company that manufactured white label and for the contracts already signed, you have to continue doing so while they are still in force. That said, the number of manufacturers that produce white labels is minimal and does not exceed 9%, since 91% of the white label products you see in stores are not produced by leading companies, but by manufacturers who are dedicated to make them exclusively.

«91% of the white label products you see in stores are not produced by leading companies»

What does a product need to reach the linear and shopping cart?

For a product to reach the shopping cart, it is necessary that a market study has been done on the attributes that the consumer seeks and at the same time, achieve a distribution. Both premises are equally important because if you have a good product, but it does not reach the linear, the consumer cannot buy it. Understand that right now what the consumer is looking for is, in many cases, less sugar, less salt and less alcohol has allowed us to take out a whole series of new product lines.

Is the current economic slowdown favoring a new resurgence of the white label?

I don't think the white mark has so much to do with crisis or not; What is driving the white label in Spain the most is the growth of the chains that support it. If the growing chains, such as Mercadona, do not support the manufacturer's brand, it will not grow.

What do they ask from Promarca to the next government to leave the polls?

We have said that there are behaviors that do a lot of damage to innovation and employment and we are always fighting for a regulation that ensures fair and fair competition between the parties, that the chains give the same opportunity of success to the manufacturer brands that to its white marks and that is, really, the consumer who chooses, because at the moment the competition is very discriminated in favor of the white marks. What we ask is that this competition be more fair and loyal, in fact, the law of the food chain was passed a few years ago, which has helped us a lot. In addition, this year a European directive against unfair commercial practices has been approved and we request a transposition to Spanish legislation, as it would greatly protect brands against distribution abuse.

«The discriminatory margin is also an abuse, that is, some brands are sold at practically zero cost and others with a lot of margin»

What do you mean specifically by "distribution abuses"?

As I said before, to the copies, and to the discrimination in the linear ones. Manufacturer brands usually have very little space or placed in worse spaces; they are not in the central space of the shelves in some very important chains. In the face of this discriminatory treatment, we ask that it be eliminated and that it be regulated against it.

The discriminatory margin is also an abuse, that is, some brands are sold at practically zero cost and others with a lot of margin. This is what increases the price and increases the difference artificially since it is not calculated on the basis of the price at which the manufacturer has sold it, but on the margin of the chain. In a study conducted five years ago, it is concluded that the margin applied to the white label is 7%, while that of the manufacturer's brand amounts to 33%. This margin of 7% is not enough to sustain the chain, that is, if they only sold a white label at that price, the chain would fail. This gives them an average margin – say 18 to 20% – and that is sustainable, but based on selling very expensive products and others very cheap.

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