How to succeed in a private label world

Lars Thomassen

We have moved from the age of the brand to the age of the retailer – a shift that has led many brands to a near-chronic state of constant stress and confusion. Fmcg companies suddenly find themselves on the defensive, as the chaos of change and disorder threatens the very foundation of their brand-based business. Not only are brands up against increased private label penetration and ruthless copy piracy, they are also facing supercharged and super-conscious shoppers who are more informed and more discerning than ever. However, the biggest challenge comes from some of the biggest players of commerce the world has yet seen – the global retailers.

The sheer scale, concentration and power of retailers have left the world of brands breathless and scared. In the United Kingdom four chains have more than 75% of the grocery market, and in the most extreme example, three chains in Finland control 91% of the Finnish grocery market. With these shares it is pretty clear who is in charge. The one who controls the shelf controls the market. Retailers increasingly dictate the prices charged and are themselves setting the terms for their relationship with each individual brand. If some brands fail to understand the situation, retailers do not fail to teach the brands a lesson, like the Coop did in Scandinavia, when, after a dispute with Kellogg's, it responded with a delisting of all Kellogg's products. A very frustrating situation for any brand owner who to a large extent finds himself with no other option than to do exactly what the retailers tell him to do – just to maintain distribution.