LABELING A NATION

LONDON -- British food retailers, among the world leaders in private-label packaged goods, have turned their private labels into private national brands.Industry executives and consultants said the four leading British food retailers -- Tesco plc, Cheshunt; J. Sainsbury plc here; ASDA plc, Leeds; and Safeway plc, Hayes -- have created models for how private-label programs should operate.Typically,

LONDON -- British food retailers, among the world leaders in private-label packaged goods, have turned their private labels into private national brands.

Industry executives and consultants said the four leading British food retailers -- Tesco plc, Cheshunt; J. Sainsbury plc here; ASDA plc, Leeds; and Safeway plc, Hayes -- have created models for how private-label programs should operate.

Typically, these retailers get at least 35% of their sales from private-label packaged goods, with such companies as Sainsbury getting up to 50% of their sales from private lines. Including produce and meat, the amount of sales in private label can reach 70%, executives said.

"In my opinion, the U.K. retailers have understood the power of retail branding," said Steven Gravelle, principal in Gravelle Strategic Brand Identity, Auckland, New Zealand. "For example, Sainsbury's Novon is now the fifth-largest detergent range [line] in the world. This means that the range is not merely offering customers a cheaper alternative to the national brand leader but is often customers' preferred choice and a brand in its own right."

Colin Porter, of London-based consultants CorpBrand Ltd., said the U.K. retailers were among the first to realize the benefits that could be gained from private-label lines -- and it wasn't only higher margins.

"They realized they could have something that was ownable and available only in their stores," he said. "And once customers came into the stores for those labels, there was a knock-on effect, because they then bought other, branded, goods."

Retail executives said they now use category management for their private-label lines in the same way that they manage major brands. Moreover, leading retailers have successfully adapted their private-label lines to market conditions, reflected in both packaging changes and pricing strategies.

For example, the arrival in the United Kingdom in the mid-1980s of such discounters as Aldi, Netto and Lidl forced the British food chains to introduce economy lines of their own, analysts said. These moves effectively shortened inroads made by discounters, which found their total market share stalled at 15% to 20%, compared with initial forecasts that they'd quickly snap up to a third of the market.

The four leading chains each have three main tiers of private-label products: economy; a core, medium-priced line; and a premium-priced line. Retailers such as Tesco, Sainsbury and Safeway recently have added organic lines to these tiers. Sainsbury and Tesco also have moved to significantly expand their premium-priced tier to cater to the British consumer's increasingly sophisticated taste in food.

Key to the success of private-label lines is packaging, executives said. Most retailers are consistent in branding their tiers across product categories. For example, economy-priced products tend to use plain, generic-looking packaging, whether it's a can of baked beans or a loaf of bread. Sainsbury's new Special Selection category of premium products uses the same bronze and blue packaging on everything, from sausages to vanilla.

It is this similar branding that communicates the product's positioning, executives said. "Retailers' own-brand packaging must, however, work twice as hard as a manufacturer's brand," said Gravelle, who helped develop the private-label programs at Sainsbury and its U.S. subsidiary, Shaw's Supermarkets, East Bridgewater, Mass., and now works with Foodstuffs of New Zealand and Coles Supermarkets in Australia.

"Not only must the packaging ensure that the product competes effectively in its market sector; it must also reflect the core values of the retailer. In other words, every retailer-branded product is an ambassador for the store, reinforcing the quality values of the corporate brand," Gravelle continued.

That's why, in Porter's view, retailers can't be too rigid in their approach to private-label packaging and positioning. "We get a little too bound up with medium- and premium-priced. Stores need to learn from what the manufacturers' brands are doing -- they are what they are and set a tone that they maintain throughout their products.

"It's about selling a product promise," added Porter, who has worked with Marks & Spencer, Tesco, Sainsbury and Boots in the United Kingdom, as well as A&P in the United States, Tengelmann in Germany and Pick N' Pay in South Africa. "That's not only in the packaging; it's also in the whole layout of the store and [extends] to departmentalization, from fish departments to produce."

But industry executives stress the success of British food retailers' private-label programs also results from the distinct characteristics of the U.K. market, in which a few national chains account for the bulk of food sales. In addition, consumers are accustomed to private-label products, from apparel to aspirin.